As a contractor it can be a bit of a minefield trying to figure out what you can and can’t legitimately claim as expenses. For instance, if you’re buying a new all-singing-all-dancing laptop, is it pushing the mark to claim for that?
Some general rules on expense claims:
All claims for expenses should be incurred wholly, exclusively and necessarily in performing your business duties.
You should not claim any travel and subsistence expenses for any one place you have worked, or know you will work, for more than 2 years.
Receipts for all expenses should be kept for a minimum of 6 years to provide evidence of expense claims in case of HMRC investigation.
Business mileage (use of your personal car)
You can currently claim 45p per mile for the first 10,000 business miles you do in your car each year and then 25p per mile after that. This mileage includes travelling to and from temporary locations and between different sites. Of course, you need to get valid VAT receipts for fuel and these must be kept to support your claim. You should record details of the business journeys undertaken.
Subsistence
You’ve got to eat! So, while working at a temporary location, you can claim any reasonable meal and drink costs supported by valid receipts. So if you buy a sandwich and coffee for lunch….keep the receipts!
Accommodation
There are several categories for submitting accommodation costs, here’s how they all stack up:
All accommodation (hotels and B&Bs) must be accompanied by an original receipt.
If you’re claiming accommodation rental costs, your rental agreement must be the original (in the name of the business), signed copy and meet HMRC Dual Purpose rules, which means that you are already maintaining a property and are renting a 2nd property for the purpose of your contract.
You may be able to make a claim for staying with friends of family whilst at a temporary work place. Please contact your Personal Accountant for more details on this.
Parking charges
Parking can be claimed as long as an original receipt detailing the date and cost is available for each amount claimed.
Rail, bus, taxi and air travel
Fare costs to and from your home and temporary place of work can be claimed where receipts are provided. For low cost flights, both original tickets and online receipts are acceptable.
Training and tuition
Any training or tuition to do with your current trade can be claimed. Training is treated like any other deductible business expense; it must be ‘wholly, exclusively and necessarily’ in the performance of duties and related to income. If the training is not linked to existing income, then it cannot be treated as a deductible expense through your limited company.
Manuals and text books
A reasonable amount may be claimed for the cost of manuals and text books required for business purposes - receipts required.
Eyesight tests
An eye test may be claimed as long as a receipt is provided. The cost of spectacles may be claimed if they are prescribed for VDU use only. This will need to be confirmed on the receipt from the optician.
Computers and other office equipment
The costs of hardware, software and other office equipment essential to your business can be claimed. There’s no limit to the amount that can be claimed.
Postage
Anything you need to post to someone or any business related post can be claimed for, again original receipts must be provided.
Office consumables and stationery
Any office consumables (printer ink, pens etc) and stationery you use for business may be claimed. This total cost must be for a reasonable amount and you’ll need original receipts to validate your claim.
Telephone
Itemised business calls from home or a personal mobile are fully claimable, while unfortunately private calls or line rental costs are not. To claim business calls a copy of your itemised telephone bill must be kept. Internet / ADSL subscriptions cannot be claimed.
If the telephone/internet contract is taken in the company name the full cost of the line rental/call charges can be claimed.
Associated travel costs
Road and bridge tolls, tunnel fares and congestion charges incurred while on business may be claimed. Original receipts are required for all items except toll fees. Speeding, parking or clamping fines cannot be claimed.
Advertising/Marketing
Costs of advertising your business is an allowable expense, so for example online search engine listings, telephone directories or in some cases even sponsorship of a local sports team.
Childcare
Up to £55 per week, per employee, paid to a registered childminder can be claimed through your company. This should be paid from the company bank account. This can be dependent on the level of your income, you may need to speak to your Personal Accountant for specific claims.
Bicycle
You could claim for the cost of a bicycle through the “cycle to work” scheme. You may even be able to claim a mileage expense for the journeys to a temporary workplace.
Donations
Donations made to a registered, HMRC approved, charity are allowable.
Use of home as office expenses
In 2012 a fixed rate of £4 a week was announced as an acceptable flat rate claim for general costs associated with the use of home, and it was confirmed that no detailed expense claim need be prepared to justify such an amount. Claim amounts above this may be able to be made – however should be supported by sufficient evidence. Please contact your Personal Accountant for further details.
Pension contributions
Pension contributions made by an employer on behalf of its employees are an allowable expense. If you would like to discuss setting up an employers pension scheme through your limited company please contact your personal accountant.
Staff entertaining
The cost of an annual staff function can be claimed through your company. This should be supported by receipts and it is important that the receipts for this expense do not exceed £150 per employee.
Life Insurance
You can save tax by paying for some life insurance policies through your limited company. If you would like to discuss setting this up through your limited company please contact your personal accountant.
So, as you can see, the list is pretty extensive…