What Business Expenses can a Limited Company claim?
In business every penny counts – whether that be ensuring your taxes are correct or increasing your profit margins. Having an understanding of what you can claim as a limited company as businesses expenses can support with both. By effectively claiming your business’ expenses your limited company will be more tax efficient.
Often many business expenses go unclaimed, resulting in your company paying more tax than you need to. When all business expenses are claimed your Corporation Tax payments will be more accurate, as allowable business expenses reduce profits and therefore the amount of Corporation Tax you pay. Simply put, for every pound spent on expenses, 19 pence will be deducted from your Corporation Tax liability.
More allowable expenses = less taxable profit = less tax to pay!
The rules from HMRC on claiming business expenses can be complicated and vary depending on a number of factors, for both the business owner, staff and company. This blog will provide you with an overview, although not exhaustive list, of allowable business expenses for your limited company and how to claim them.
Claiming Expenses – Simple & Efficient
Business expenses can be paid directly from the company account or as a “reimbursed expense” when the initial cost was paid by you, or your employee, personally.
It is important to ensure that an accurate record of all reimbursements from any and all company accounts are kept, including any and all receipts.
Should you allow for your employees to claim expenses it is advised that you have specific policies and procedures in place in order for them to do this. For example; providing employees with a template expenses claim form that must be signed and submitted, including all receipts, at the end of each month. Clear policies on what and how much can be claimed by your employees is also advised to ensure that no issues can arise in the future.
The key point to stress on all expenses claims is the importance of receipts and clear records. In order to reclaim any and all expenses clear and accurate receipts must be stored, with best practice to store the paper copies somewhere safe as well as backing up with a digital copy. There are several accountancy apps that can support with this, by allowing you to log your expenses on your phone/tablet by taking a photo of your receipts.
For expenses that can be claimed but you are unable to provide a receipt, for example business mileage, clear tracking of expenditure should be detailed. In this instance a good example of recording would provide a spreadsheet detailing the breakdown of each journey and the mileage covered for each month.
Without accurate, detailed, clear and evidenced records HMRC could refuse to validate your claim. Therefore, you must ensure that accurate records are kept for all of your expenses and that all records are kept for a minimum of six years, as required by law.
What can you claim?
The cost of anything that is necessary for the running of your company will receive tax relief – not withstanding mileage you are not limited to a specific amount of supplies for your business (within reason!)
Unlike mileage, in the majority, all other expenses can be recorded in bulk, for example; buying 5 packs of 100 sheets of paper at £2 each, can be recorded as 500 sheets of paper for £10. Again, you must keep the receipts for each individual purchase in case your claims are reviewed by HMRC at any point over a 6-year period.
Below is an overview of some of the most common and simple business expenses that you and your employees can claim. This list is not exhaustive and if you have any questions or would like more information on any of the areas mentioned please get in touch with Byte Accounting and we would be happy to discuss this with you.
- Vehicles & Mileage
One of the most common and easiest expense claims is on business mileage. If you have personally paid for fuel using your personal vehicle to get to a temporary place of work, you are entitled to claim this back as a business expense. Business mileage can be claimed from HMRC per tax year at the following rates:
|Vehicle||Rate per mile (first 10,000 miles)||Rate per mile (each mile over 10,000 miles)|
|Car or Van||45p||25p|
An important point to reiterate is the importance of clearly and efficiently documenting yours, and/or your employees, business mileage.
If you, and/or your employees, use a company car to complete their business mileage then only the cost of the fuel can be claimed.
Although not limited to mileage you may also be able to claim for the following, vehicle insurance, fuel, parking, repairs and servicing. However, this can only be claimed if you are responsible for paying the travel costs and if all travel that is completed is necessary for your work. Travel that is part of your commute will not be included – with your commute defined as the journey between home and your permanent place of work.
- Accommodation & Travel
Should you have to travel for work you may be able to claim business expenses on the costs of several things including public transport costs, hotel room fees, parking fees and food/drink.
When working away for the day, if you exceed five working hours, you are able to claim the costs of your lunch. If your day stretches to up to 10 hours you can also claim the cost of dinner.
Should you travel to a temporary location, for business, you are able to claim expenses on any accommodation required (as long as the expense is reasonable – so no 5-star spa hotels!) HMRC will likely question excessive claims, so ensure that where you choose to stay is reflective of your needs.
- Forming your company
Setting up a new business is not always cheap, however certain aspects can incur tax-relief and allowable business expenses. All relevant expenses required in the formation of your business, from printing costs to equipment through to accountancy fees and legal formation costs can be claimed.
- Accountancy fees
As a limited company you can claim tax relief on the full cost of your accountancy fees – as long as your accountant’s time is spent completely on your company’s matters. You can also claim on time spent providing advice and on time spent working on your personal tax affairs – this will, however, need to be recorded as a benefit in kind that is taxable to you personally.
- Charitable donations
You are able to claim tax relief when your company gives donations to charity. This is done through the deducting of the value of your donations from your total business profits before you pay tax. Charitable donations do not only include monetary donations, but also the donation of equipment, property, shares in another company, employees and sponsorship payments.
- Equipment, Fixed Assets & Resources
All costs that are essential and necessary in order for you to complete your role within the business are eligible as a business expense. Tax-relief towards the cost of both equipping (computers/printers/software) and furnishing (chairs/desks) an office can be claimed. If there is a business need for the item, and the personal use is insignificant no personal tax would need to be paid.
Landlines – if used for business use only the cost of your landline contract can be claimed as a business expense. Often the best way to ensure this is the case is to have a separate phone line for business.
Company Mobiles – if the mobile phone contract is between the company and the phone provider, the company can then claim all costs as a business expense.
Personal Phones – companies may choose to pay the cost of personal phone bills for employees, either by covering the full cost of the bill (and the employee paying the benefit in kind charge on the total amount) or by claiming for business only calls made on a personal phone. This is increasingly difficult to separate as a cost as the employee will need to prove that it was a business call and due to phone providers offering package costs, i.e.; free minutes. If business and personal usage cannot be separated then a claim cannot be made, as the phone is for dual use.
Disposal of assets – if assets are no longer used or become obsolete within the company you may choose to get rid of it. Whether you choose to sell, scrap or continue to use your assets you must ensure that all are accounted for within your business expenses records.
General office needs – small costs, such as postage and office stationery, can be claimed for with receipts, when the purchase is necessary and exclusively required for the completion of your role.
Home Office & Broadband – you can claim £4 each week as a business expense if you work from home regularly. In order to claim this expense, you must be able to prove that you regularly spend time completing your role at home. In addition, any necessary equipment required will also receive tax-relief such as furnishing a home-office, so long as the expense is within reason.
The cost of your home broadband can also be claimed as a reasonable expense, if you are able to separate your business and personal usage. If you have no broadband at home and you require internet access in order to complete your role you are able to reclaim the costs as a business expense. However, this claim cannot be made if the broadband was already in place.
- You & your staff
The Christmas Party! An annual event, such as the office Christmas party, can be a tax-free benefit. The key criteria required in order to claim for this as a business expense is that the event is attended by mostly staff and generally an expenditure of £150 per head (including VAT) can be attributed. You would be welcome to invite a partner, so long as this expenditure is not exceeded, for example one employee and a plus one would provide a total budget of £300. This budget is an annual amount and can therefore cover multiple events for staff if you so wished.
Vision – the cost of eye tests, glasses or contact lenses can all be claimed as a business expense, if required for the initial or continued used of visual display equipment, as needed for your role. Claims are only acceptable if the prescription is specifically for your time at work for ‘monitor or screen work’.
Salaries – a salary paid to you as an employee (or the director of your company) is an allowable expense, including any National Insurance Contributions. By paying a tax-efficient salary (up to the National Insurance Contribution threshold) you will save money through the lowering of your monthly salary, as once you cross the threshold you will begin paying National Insurance Contributions.
Training – the cost of training for the purpose of improving your skills, that specifically apply to your area of work, can be claimed. The training must build upon your existing knowledge and skills, rather than offering new skills, and apply to your work. Within this the cost of travel and accommodated incurred while attending training can also be claimed.
As you can see there are lots of eligible expenses that can be claimed through your business, including regular costs and one-off purchases – all of which can support your business to grow and develop financially.
For more information on the business expenses your company can claim or for support for your business please contact Byte Accounting.