What Type of Business Expenses Can I Claim?
We’re going to be looking at allowable business expenses. This is what we’re going to be covering today. These are our aims. We’re going to be looking at the day to day, allowable expenses, how to become a tax efficient company, some frequently asked questions and some examples.
These are the day to day expenses I would expect you to have in your Crunch account. Travel to and from a temporary place of work, if your home is your permanent place of work, any accommodation overnight if you’re having to stay over, mileage if you’re driving, train travel or taxis and subsistence.
Subsistence is your lunch as you’re away from home to your temporary work place, sometimes breakfast if you’re up early in the mornings. Please make sure you keep your receipts for this, because this does differ if you’re previously been an umbrella company.
You have your staff entertainment, so this is you and your partner for a Christmas party or throughout the year, but bear in mind, there is 150 Pounds, including that limit, per attendee, annually. Any other entertainment, that is actually disallowed for corporation tax purposes, but it is more tax efficient for your company to pay for it. It’s important to differentiate between the two when you’re entering these expenses into Crunch.
Other day to day expenses
Some of these could be a P11D benefit, which would mean your company would be liable for 13.8% national insurance. They would be included on your self-assessment and taxed at whatever income tax rate you’re taxed at. Not always though, so just bear that in mind. Accountancy fees … If your company pays for your self-assessment, then that would be a P11D benefit, because you personally have benefited from your company paying for your self-assessment.
These have to appear on the HMRC approved list. Use of home office … We have a separate slide on this, so we’ll go over that in more detail. Telephone and internet … I would much prefer to see your telephone and internet costs in your company’s name, not your name personally. HMRC have some special rules around this.
This is a P11D benefit, because again, your personally going to be benefiting from your company providing you with additional insurance and any training. Mostly, training would be allowed, unless it brings new skills, new understanding or enables you to do a job differently to the hat you do it now.These are other allowable expenses. Your company can make charity donations. You can have childcare vouchers.
Eye test and glasses
With respect to the glasses, if you already wear glasses, it’s unlikely that you’ll be eligible to claim for new glasses because your eyesight is already in need of glasses. General office stationary, pens, paper, pads, just general office expenses, those are all fine. Your company formation fees, gifts, both of these are disallowed for tax purposes, but again, they are business expenses, so your company can pay for them. Any equipment that you need, any software and pension payments also got a separate slide on pension payments, too, because that does help you to be tax efficient.
Here’s a use of home office. HMRC allows you to claim 4 Pounds a week without it giving rise to any additional tax and you don’t have to offer up any receipts for that, either. Alternatively, you can claim for a proportionate of your home bills, so you’d need to add up what your rent or mortgage interest is, your utility bills, council tax, home insurance and then proportionate by the numbers of rooms and the numbers of hours that you use those rooms. Keep a record of those breakdowns. We do have a spreadsheet that we can send you that helps you to break out this information and I would also strongly recommend that there’s an agreement between you, the homeowner, and the company, just to say what you are allowed to do in those rooms and what times. I would never expect you to use 1 room 100% for business use. This could give rise to a capital gains liability when you sell your property.
Here’s our separate slide on the pension contributions.
If you wanted to make personal pension contributions, then that’s limited to your salary, if you have one. If you have a Crunched tax efficient salary, then your maximum pension contributions can be $7,956, so it’s not a huge amount that you can pay into your pension tax efficiently. Therefore, your company can pay an unlimited amount into your company pension, but there is an annual limit of 40,000 pounds for the 14/15 tax year. That’s a significant amount your company can pay in, tax efficiently.
Here’s a couple of other tax efficient examples.
There’s an annual investment allowance, which you can claim for business assets, things like equipment, furniture, computers, printers. The equivalent cost is what you then save in tax. If you buy the equipment for 3,000 Pounds and you’ve got profits of 15,000 Pounds before corporation tax, you take off the 3,000 Pounds that you’ve paid for your equipment, so therefore you only pay the corporation tax on the 12,000 Pounds difference and overall, that’s a saving of 600 Pounds.
For the next part of the webinar, we’re going to be covering off some frequently asked questions. We do get many questions at Crunch about the 24 month rule, simply because you could get a contract for a period of time. Sometimes it comes to an end and sometimes it gets extended. This is a 2 part test that we have to look at. If your initial contract is less than 24 months, again, your home being your permanent place of work and you’re traveling to a temporary workplace, you can claim for travel and subsistence to that temporary workplace.
If your contract to start with is greater than 24 months, you can’t claim for any travel or subsistence. This is because that place of work will become your permanent place of work. If you pass part 1 of the test, you can then move on to part 2 of the test. In order for you to be able to claim the travel and subsistence, there needs to be a reasonable expectation that you will get further work after that contract is terminated or just naturally comes to an end. It doesn’t have to be with that same company, but you need to remain employed by your same employer, which would be your limited company and the further work has to be at different location after that first contract comes to an end. It could still be within the square mile of London, but it just has to be at a different location.
Some other frequently asked questions
Accommodation while you’re working away … This example here, you live in London, but you’ve got a contract in Liverpool. It works out cheaper instead of commuting every day to Liverpool to rent a flat. All of those bills would be allowed for business expenses, simply because you’re only there to fulfill a contract, so it meets the wholly and exclusively terms to help by HMRC. Any travel to Liverpool is also allowed and travel to the rented flat to the office is disallowed. This is because that’s your permanent place of work for that period of time and again, the contract can’t exceed 24 months, otherwise the same rules apply, in terms of actual permanent place of work and therefore none of the bills are allowed.
Some other frequently asked questions :- Subsistence day to day
Your home is your office, so therefore going out to your client’s offices to work, that’s your temporary place of work, so you can claim for lunch, breakfast if you start early, and if you work longer than 10 hours, then you can claim an evening meal, as well. I would note that the cost does need to be reasonable. Eating at the Ritz every lunchtime would probably be deemed unreasonable from HMRC’s point of view, but grabbing a sandwich, some crisps and a drink, that would be a reasonable expense.
Again, with overnight accommodation, a 5 star hotel probably would be unreasonable, especially if you’re taking your partner with you, but then you could also proportion the cost. You’re staying in a 5 star hotel because you’re taking a partner, so just claim for half the cost, but note that you can only claim their full half of the vat back if you are a standard rate BAT scheme.
More frequently asked questions :- work clothes
Unfortunately, these have a duality of purpose. You could wear that at work, as well as at your leisure. Therefore, this would be disallowed for corporation tax purposes and we would ask you to delete these expenses from your Crunch account and HMRC do not allow any type of work clothes, unless they’re safety clothes and then the rules are slightly different. A suit for work is not allowed for tax purposes.
Let’s have a little recap of what we’ve covered. Expenses must be wholly and exclusively for business use. This is really important. You have to ask yourself, “For my job, for my business,” any contracts that you enter into, whether it be for training, internet, telephone, need to be in your company name. The help center has a whole heap of questions and answers and also there’s the guides that are available from the Crunch website for you to download.