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Accountant

ALLOWABLE EXPENSES

Mastering the basics: Rules to follow

  1. You can only claim for the expenses you incur wholly and exclusively during the everyday running of your business.

  2. You can’t claim for expenses that have a dual purpose for business and personal use. For example, if you decide to extend a business trip abroad for leisure purposes, you can only claim for the business days, not the additional leisure days.

  3. Business expenses can be paid through your company’s bank account, or you can reclaim the costs of business expenses paid by you personally and later reimbursed via your company.

  4. The majority of limited company expenses can be offset against your company’s corporation tax liability – although there are some exceptions, including business entertainment.

  5. Try to maintain an accurate record of pre-formation and running costs, including VAT receipts, so you can justify your actions if you’re queried about your business expenses claims in the future.

How to claim expenses as a limited company

You can either pay your limited company’s expenses straight from your business account or as a reimbursed expense if you decide to fork out from your own pocket. Employees can claim expenses too, so it’s worth creating a company expense form and policy to make sure everyone understands how much they’re allowed to spend and where.


Top tip: Remind your staff to keep hold of all their receipts and collect their expense forms at the end of each month.

How to keep a record of limited company business expenses

You need to run a tight ship when it comes to keeping track of your limited company’s business expenses. Without accurate record keeping HMRC could knock back your expenses claim. Whether it’s business mileage, fuel costs or equipment, it’s important to keep physical and digital copies of all relevant receipts. 

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Having a good accounting software can help with this.
 

Limited company expenses you can claim

Wages, salaries and related staff costs

  • Salaries, bonuses, pensions, benefits for employees

  • Employer’s National Insurance Contribution (NICs)

  • Agency fees

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Insurance, rent, rates and power

  • Rent costs for the business premises

  • Business rates for the business premises

  • Water rates for the business premises

  • Light

  • Heat

  • Power

  • Property insurance

  • Security

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Maintenance and repairs to equipment and premises
Repairs and maintenance of business equipment and property – buying, improving or altering a property is not included


Car, van and travel

  • Car and van insurance if the vehicle is an asset of the business

  • Repairs, servicing and fuel

  • Hire charges

  • Vehicle license fees

  • AA or RAC membership

  • Train, bus, air and taxi fares (excluding travel to and from home to a permanent place of work)

  • Hotel accommodation when on business trips

  • Meals for overnight business trips

  • Inoculations

  • Visas for business travel

  • Parking costs

  • Road toll fees

  • Congestion charges

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Advertising and marketing

  • Advertising in newspapers

  • Paid listing in directories

  • Website costs

  • Mailshots

  • Online ads such as Facebook and Instagram

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Other office running costs

  • Phone

  • Fax

  • Mobile phone

  • Internet connectivity

  • Email

  • Stationery

  • Printing

  • Postage

  • IT software

  • Some small office equipment like office furniture, office desk chairs, printers

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Professional fees

  • Fees for solicitors, accountants, surveyors, architects and other professionals

  • Professional indemnity insurance premiums

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Banking and other financial charges

  • Bank, overdraft and credit card fees

  • Hire purchase interest and leasing payments

  • Alternative finance payments

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Health check and eye test expenses- not the cost of glasses
Startup Costs
Professional development expenses
Use of home as office (flat rate fee of £6 a week)
Professional subscriptions – such as annual membership fees in the profession you work in.


Uniform

  • Must be branded or

  • Specific to profession e.g. Hard hat for a Builder or scrubs for a Nurse. 
     

Which expenses are excluded from tax relief?

There are some revenue expenses which, whilst genuinely connected to the business, aren’t applicable when it comes to tax relief. Often these are referred to as disallowable expenses or even expenses to be added back.
As a rule any expense that is partly covered as a business expense but also personal won’t qualify. Anything with a personal aspect simply isn’t allowable. Examples include:

  • Business entertainment – entertaining clients

  • The repayment of loans taken out personally to help run the business

  • The depreciation of assets

  • Drawings including payments for tax and National Insurance Contributions (NIC)

  • Fines and costs resulting from breaking the law such as car parking fines, if incurred by proprietors or directors

  • Charitable donations, including subscriptions, with the exception of small charities

  • Political donations

  • Clothes – You cannot claim for clothes you wear to business meetings as these are not wholly and exclusively relating to business.

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Utilising the different expenses could really help your business.

If you would like to find out more or need help with managing your expenses get in touch with us today.

Get in touch with us today

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