As a Limited Company, you will incur a number of expenses whilst running your business. To help, we have created a short and informative guide to get you started on commonly claimed expenses as a Limited Company.
Understanding how reclaiming expenses works for a Limited Company
The hardest part is keeping track of your expenses, if you have paid for these personally or through the business directly. But with Aardvark Accounting, this can be made easier, as you’ll have access to FreeAgent as part of your service, which means you’ll be able to keep an eye on your expenses! Once you’ve entered or scanned all the receipts, it will show you exactly what you’ve claimed at any time.
If you pay for expenses personally on behalf of your company, you’ll need to make sure you are reclaiming these back so that you’re not out of pocket.
You should always remember to keep all of your receipts to prove that your expenses are legitimate. If you don’t want to keep paper copies of your receipts then you can keep digital copies, bit make sure you’ve got a backup copy!
What expenses can I claim?
Any allowable expenses that you incur, will in turn reduce the company income. As your corporation tax will be due on your company profit after expenses, it’s important that you claim for expenses as and when you incur them.
What business expenses can I claim for?
These are just some of most common business expenses that you can claim:
- Travel expenses
This could be a number of costs such as public transport, subsistence, parking expenses, flights and hotels whilst on a business trip and even temporary accommodation, if you need to stay close by where you are working. If you are also using your own vehicle then you can claim for business mileage at 45p for the first 10,000 business miles and 25p thereafter each tax year. The mileage allowance includes the cost of buying and running the vehicle (such as repairs, maintenance, insurance and fuel).
You will not be able to claim the cost of any travel to and from home to your workplace. Any claims have to incurred for travel to a temporary workplace (you need to consider the 40% and 24 month rule, which you can find more in depth information on in the ‘travel and subsistence through Limited Companies’ guide).
- Working from home
If you work substantially from home, you can charge a proportion of your running costs. This can be for rent/mortgage interest, council tax rates, water and sewerage, light and heat and insurance costs.
You need to then calculate the total of these costs and work out the business proportion by looking at the area used by the business and how long you are actually working in that space.
Or you can claim the HMRC approved rate of £4 per week, which you can claim without any receipts and calculations, so if you are working mainly away from home, this is the easiest option.
- Phone and Internet
For both the telephone/mobile phone fixed costs, you will not be able to claim this if the contract is in your personal name. Instead, you will need look at the itemised bill and claim the cost of any specific business calls.
However if you have the contract in the business name, with incidental personal use, the full cost can be paid for by your Limited Company.
As for any internet costs, if you already had an internet line personally before the company, unless there has been an incremental increase in cost for the business using the line, you will not be able to claim this as an expense. But if you have had to increase your line speed specifically for the business or have a dedicated business line, you can make a claim for this against your company.
- Insurance costs
This will vary depending on the type of company you run, and the risks that you will face. However most Limited Companies will require:
- Professional Indemnity Insurance – this will protect you in the event that you provide incorrect advice that causes your client a financial loss.
- Public Liability Insurance – this will protect you if someone is injured or their property is damaged because of your business.
- Employer’s Liability Insurance – you’ll only need this if you have an extra pair of hands to help you. This will cover any employees or temporary staff if they should want to make a claim against your business if they’re injured or fall ill whilst at work.
- Pension contributions
Any contributions made for directors and employees, will be an allowable business expense. This is one of the most flexible and tax efficient ways to reduce the corporation tax liability, whilst also being able to have this income personally on retirement.
There is a cap on the amount of personal pension contributions an individual can have each tax year and this should be discussed with an Independent Financial Advisor to make sure you stay within the limits, otherwise you’ll get a nasty personal tax shock!
- Stationery, marketing materials and advertising
Stationery costs could be for business documents, such as letterheads, business cards, pens, paper, etc.
Plus, any costs for promoting your business and advertising your business such as adverts in newspapers, website costs and direct mail are all deductible. However remember any costs for entertaining current or prospective clients is not allowable.
- Training courses
You can only claim for the cost of any training courses which relate to your current trade, in regards to refreshing any skills you already possess. However if you fancy learning any new skills for a potential future trade, this would not be allowable.
- Professional fees, including accounting and solicitor fees
If you pay an accountant to help with your company’s affairs you can offset this cost against your revenue. However you can’t claim any company tax relief if you pay for your personal self-assessment tax return as well.
Along with any other professional fees, such as solicitor’s if you need any legal advice.
- Equipment and software
This could be for any equipment that you require for your business, such as computers, printers, scanners, software and any other items that you might need for testing.
If you have any significant personal use of any company equipment, this will need to be considered and declared on your ‘expenses and benefits’ (P11D) submission to HMRC.
- Salary and other staff costs
This includes any costs for having an employee (this includes you and any other employees) in your company. You’ll need to make sure you’ve registered a PAYE scheme and are deducting the correct taxes, along with making the relevant submissions to HMRC.
The optimum levels of salary will be discussed with you in detail, to make sure this is tailored for you, based on your IR35 status and personal circumstances.
- Staff and client entertaining
You can claim for an annual event, for up to £150 per attendee (this can include yourself, your partner and household members), per year.
It can be for multiple annual events, as long as the total average receipted cost comes to less than £150 per attendee. Please remember this is not an allowance, you actually do need to have an event and claim the receipted amount – so make sure you treat yourself!
However any other entertaining, such as drinks with a current client or dining with a prospective client, can be claimed back as an expense but you will not get any company tax relief.
There are lots of other expenses not detailed here such as books, childcare costs, donations, eye tests, other insurances and subscriptions. This is not an exhaustive list and there will be other expenses that can be claimed, which specifically relate to your business.
How Aardvark Accounting can help you?
Alongside the personal service, you’ll have access to market leading software – FreeAgent. You’ll have everything you need, even on the move with the handy mobile App.
To see how we can help you, contact Aardvark Accounting today. We’ll do the “aard” work for you!
01425 471917 or contact us here