Below is a list of expenses you can claim as a limited company.
There are different rules for sole traders and partnerships which are listed here.
This relates to costs directly related to sales.
For example, if you were building a house, the direct costs would be the bricks, cement, windows, etc required.
These are people you pay to complete a particular task - they aren't employees. If you pay someone to help you complete a particular section of work they would be classed as a subcontractor.
You will need to register for CIS if you pay subcontractors within the construction industry, click here for details.
Employee costs include: wages & employee benefits (e.g. medical insurance).
This includes the salary paid to company directors. It's usually tax efficient to pay a director/shareholder a small annual salary and top this up with dividends.
Company pension schemes are a great way of reducing your corporation tax liability. Make sure that it is a company pension scheme and not a personal one.
If you have business premises then you may pay rent, business rates, gas, electricity, water and cleaning costs. All of these costs are allowable for tax purposes. If you rent a storage unit for stock or provide parking spaces to employees at or near your work then these are also business expenses.
If you are a small business you may be able to claim business rates relief - click here for more information.
Use of home
Directors and employees can claim the following:
Fixed amount: If a substantial amount of time is worked at home each person can claim £4/week without the need to maintain receipts or bills. Simply put an expenses claim into the company, much like you would if you were employed by another company.
Broadband: If the person didn't have broadband in their home before working from home (which is very unlikely) they can claim 100% of the cost. If the person had broadband already they can claim the difference between any upgrade (e.g. someone upgrades to fibre optic from £10/month to £30/month - they can claim the £20 difference). HMRC guidance on this can be found here.
We would suggest taking out either public liability and/or professional indemnity insurance to cover your business. If you have employees you are required by law to get employers' liability insurance although, you may not need employers' liability insurance if you only employ a family member or someone who is based abroad.
Public liability insurance protects against claims of personal injury or property damage that a third party suffers (or claims to have suffered) as a result of your business activities.
Professional indemnity insurance (also known as professional liability insurance) helps protect professional advice and service providing businesses from bearing the full cost of defending against a negligence claim made by a client.
Employers' liability insurance will help you pay compensation if an employee is injured or becomes ill because of the work they do for you.
Our governing body offers us a discount with Hiscox so we use them - if you have a governing body, it’s worth checking with them to see if there is a provider they recommend. We’d also suggest getting a quote from a comparison website such as Money Super Market, Confused.com or Compare The Market.
IT & software costs
Bookkeeping software: Quickbooks, Xero, FreeAgent, Sage One (click here for our bookkeeping software review).
Software: Microsoft office, business apps.
IT costs: Laptop, desktop, tablet, mouse, keyboard, USB memory stick.
If you have a premises you can claim for the full cost of the office phone there.
You are also able to claim for mobile phone costs for you and your employees. If the mobile contract is in the company name you can claim the full cost but if the contract is in the individuals name you may only claim for the additional business call costs.
Postage, printing and stationery
Postage: Stamps, envelopes, sellotape
Printing: Printer, paper, ink
Stationery: Pens, pads, paper clips, highlighters
Digital ads: Google/Facebook, TV, radio, magazine, newspaper
Physical: Leaflets, billboards, business cards
Other: Networking events, sponsorship
Domain name - our domain name is millwardmay.co.uk. There is usually an annual payment required to keep your website address.
Web hosting provider - provides the technologies and services needed for the website to be viewed on the internet.
Web designer - paying someone to build your website.
Travel & subsistence
Travel and subsistence can be claimed when travelling to a temporary workplace, click here to see if you can claim.
Travel: Trains, buses, aeroplanes, taxis, etc
Subsistence: You can claim a reasonable food expense when travelling and keep receipts or you can pay benchmark rates set by HMRC that can be found here.
You can either own the car personally and pay yourself mileage or you can buy a car in the company name.
You can claim 45p per mile for the first 10,000 miles and then 25p per mile after that (per tax year). For example, if I drove 12,000 miles during the tax year, I could claim 45p x 10,000 + 25p x 2,000 = £4,500 + £500 = £5,000
It is rarely worth buying a car in the company name as the personal tax payable is extortionate! This could change for electric cars in 2020 as the benefit charge is set to be reduced.
Costs (BIK - P11D)
Removing, destroying or storing damaged, used or other unwanted products and/or substances.
Small tools & equipment
A carpenter could claim for a saw, chisel & tape measures for example.
Safety boots, helmets, goggles, high visibility jackets, ear defenders or any other equipment designed to protect the wearer's body from injury.
Training, books & journals
Training - courses that enable you or your staff to provide a better service/product are claimable.
Books/journals - the publication must be business specific and not for self-interest. If you buy a work-related book just to broaden your background knowledge, you’re unlikely to be allowed to claim tax relief on the expense.
You can claim up to £150 per head per year on annual events such as a Christmas party and the employee doesn't need to pay personal tax on this - to qualify all expenses must meet the following conditions:
£150 (including VAT) or less per head
annual, such as a Christmas party or summer barbecue
open to all your employees
Click here for more details.
An employer can provide trivial benefits such as a bunch of flowers, a box of chocolates, a meal out and the employee doesn't need to pay personal tax on this - to qualify all expenses must meet the following conditions:
it must cost no more than £50 to provide
it isn’t cash or a cash voucher
it isn’t a reward for their work/performance or in any way contractual
If you’re the director, you can’t receive trivial benefits worth more than £300 in a tax year.
You can claim for all fees that relate to producing the accounts and business advisory services. You aren't able to claim for fees that relate to personal tax.
The company can cover the cost of any subscriptions to professional bodies recognised by HMRC, click here for a list of recognised bodies.
It’s tax efficient to pay charitable donations through the company instead of paying them personally - you can’t claim gift aid if you pay to charity through the company and it can’t be claimed as a cost if you made a loss during the year.
Client entertaining - you must be discussing a particular business project or forming/maintaining a business connection. It must be reasonable and can be for such things as food, drink, accommodation, theatre or sporting tickets. The business can pay for this entertainment, however it is not allowable for corporation tax purposes and VAT cannot be recovered. The best way I can describe and entertaining expense is its like taking a dividend but not paying the personal tax on it, you do still have to pay the corporation tax.
Hospitality can only be treated as allowable for corporation tax if something of equivalent value is given in return ("quid pro quo").
Staff entertaining this is allowable for corporation tax purposes as long as it is wholly and exclusively for the purposes of trade. Unless it is covered by a particular exemption, a personal tax charge could arise on the employees for any benefit they are getting from this.
Bank charges & credit card costs
You can't include costs for personal cards - the cards must be in the business name.
Bank charges - monthly fees, specific transaction fees (including foreign currency), exceeding overdraft fees, interest.
Credit card costs - monthly fees, late payment fees, foreign currency fees, interest.
Loan interest & hire purchase costs.
Fixtures & fittings, plant & machinery, motor vehicles and computer equipment.
Exempt employee benefits
Periodic medical checks or health screening - only one a year is exempt.
Eye tests - if they are required by health and safety legislation for employees who use a computer monitor or other screen.
Research & development (R&D)
R&D reliefs support companies that work on innovative projects in science and technology. It can be claimed by companies that seek to research or develop an advance in their field. It can even be claimed on unsuccessful projects.
You may be able to claim Corporation Tax relief if your project meets HMRC’s definition of R&D - click here for more details.
Common expenses people incorrectly believe they can claim for:
Personal clothing that isn't protective or branded.
Glasses that are used personally
Travel with a dual purpose
Home broadband (see use of home section above)