As an accountant I am often asked “what expenses can I claim?” The first thing to mention here is that expenses have to be “wholly and exclusively” for business use. That is the rule of thumb I remind clients of when they are unsure whether to claim or not for something they have just bought. So if you have just bought a new suit that you will sometimes wear to the office but could, if you wanted to, wear to your cousin’s wedding then this would not be an allowable expense.
I have compiled a list of the top ten most common expenses you can claim as a limited company contractor:
- Mileage. You can claim mileage rather than claiming back the cost of fuel. Mileage rates are set to cover the cost of fuel and wear and tear, insurance, etc etc on your car. Current rates set by HMRC are 45p per mile up to the first 10,000 miles and 25p per mile thereafter. If you have a motorbike you can claim 24p per mile and you can claim 20p per mile for a bicycle. If you are a passenger in another vehicle then you can claim 5p per mile.
- Travel. Planes, trains, buses. All valid business expenses, just keep your receipts.
- Insurance. A lot of contractors now have to have valid business insurance as stipulated by their contracts. So public liability, employers liability, etc are all valid business expenses. Some life insurances are also valid expenses also. However I don’t recommend claiming private health insurance through the company as this generates a benefit in kind.
- Accommodation. Many contractors work away from home and have to pay to either stay in a hotel or b&b or in some instances it works out better to rent a small flat or live in a house share. All of these forms of accommodation are valid expenses and again all you need to do is keep your receipt. One point to note is that HMRC do not state limits for claiming however they do expect the costs to be reasonable i.e. when away on business it would be assumed that you wouldn’t rent out the penthouse suite at the Ritz!
- Computer Equipment. Laptops, desktop pc’s, printers, software, etc.
- Postage & Stationery. Printer paper, business cards, postage costs, etc.
- Use of Home. You can claim a flat £4 per week for the use of home without having receipts. If you wish to claim more than this as you perhaps work a couple of days at home and the rest in the office then it becomes a bit more complicated with working out the pro rata costs and you do have to retain receipts.
- Clothing. As per above it is not okay to claim for clothes that are dual purpose, however it is fine to claim for protective or specialised workwear.
- Professional Fees. It is fine to claim for fees and subscriptions that you need to maintain your current professional status. The body must be on the list stated by HMRC https://www.gov.uk/government/publications/professional-bodies-approved-for-tax-relief-list-3
- Accountancy Fees.
This is my top ten most common expenses however the list is not exhaustive. Points to note:
- Travel & accommodation are subject to the 24 month rule which I will be covering in another blog post.
- For an up to date and in full listing HMRC publish a 133 page document on the subject which can be read here https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/524001/480__2016__05_16.pdf
- HMRC state that you must keep receipts and full records of transactions for a period of 6 years from the end of the last financial year they apply to.