INSTALLERSUPPORT
ALLOWABLE EXPENSES FOR CONTRACTORS
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BELOW IS A LIST FROM TAX SMART Group of ‘ common expenses ’ claimed by the majority of contractors operating through a limited company . This list is not exhaustive , for the A to Z of expenses allowable under a limited company please visit the HMRC website and use search term ‘ expenses and benefits a to z ’.
As a general rule of thumb , you can reclaim all expenses that have been incurred wholly , exclusively and necessarily in the course of running your limited company .
There are variable rules around expenses that have a dual purpose ( i . e . for both personal and business use ), some are allowable based on a simple calculation ( proportion of utilities if working from home ) and some are not allowed regardless of their business proportion ( mortgage interest , council tax ).
There is no order of importance to the order in which these have been listed :
1 . Director ’ s salary Typically , a Sole Director should take around £ 8,060 p . a . which is £ 672 per month and just below the Primary Threshold ( PT ). If the Limited Company has an employee other than the Director and is paid over the £ 156 per week then Tax Smart Group recommend the Director takes a salary of £ 11,000 in order to maximize the Annual Personal Tax Allowance and reduce the Gross Profit by an additional £ 2940 and save £ 588 on the Corporation Tax bill .
2 . Salaries paid to Employees It is possible that you may ask your spouse or another member of the family to help you with the management of your limited company affairs . You can register this person as an employee on your company payroll . This individual can take advantage of receiving up to £ 11,000 per annum tax-free . This £ 11,000 per annum salary paid to your spouse / employee is 100 % tax deductible .
3 . Employer Class 1 NIC contributions payable on salaries to company employees If you employ an additional employee and pay them over £ 156 per week you will be liable to 12 % Employers NIC . You will receive Employment Allowance of £ 3,000 ( as of April 2016 ). Any Employers NIC paid over this £ 3000 is 100 % tax-deductible meaning that it is deducted from your Gross Sales before the CT is calculated at 20 %.
4 . Mileage allowance of 45p / mile for the first 10,000 miles , and 25p / mile thereafter for own vehicle use Even if you are a passenger in a vehicle , travelling for business purposes , you can claim for 5p / mile . For motor bikes , there is a flat rate of 24p per mile , and for bicycles 20p per mile .
5 . Parking Costs You can also claim for parking and the congestion charges but you may not claim for parking fines or speeding fines .
6 . Public Transport The cost of travel by public transport can be claimed but you must have a valid receipt . When claiming travel expenses it is advisable that you keep a note of the dates , reason , locations mileage , type of transport etc .
7 . Subsistence Subsistence includes meals and accommodation when travelling to a temporary place of work . This is in addition to other necessary costs of travelling , e . g . parking charges , tolls , congestion charges or business phone calls .
8 . Training course fees As long as the skills are relevant to the business you are in .
9 . Stationery , postage , and printing costs
10 . Business insurance The most popular types of business insurance such as public liability , employers liability , legal expenses , tax investigation , and professional indemnity insurance are all legitimate business expenses , and are 100 % allowable .
11 . Company formation and ongoing costs ( e . g . Annual Return fee ) Although the company formation fee is a ‘ capital cost ’, and cannot be set off against Corporation Tax , when using some accountancy services , such as Tax Smart group , there is no cost when setting up your Limited Company .
12 . Home Bills can be claimed but you must calculate these correctly If you have to work at home on a regular basis , you can only claim for things to do with your work , e . g . business telephone calls , mobile calls , broadband or the extra cost of gas and electricity for your work area . Directors ( and employees ) can ’ t claim back any proportion of rent , mortgage interest , or council tax from their companies , as these costs would have been paid personally anyway .
13 . Purchase of Computer equipment and software .
14 . Advertising and marketing of your business .
15 . Business gifts up to £ 50 per individual are allowable before more complex rules apply .
16 . Bank charges .
17 . Christmas party exemption for directors and employees of £ 150 per person per year ( you can include your partner or spouse ).
18 . Professional fees , such as accountant or solicitor .
19 . Professional subscriptions .
20 . Capital allowances ( depreciation of assets ).
21 . Business magazines and books .
22 . An eye test for employees who use computer equipment .
23 . An annual private health check for employees .
24 . Pension Contributions
This article is just for guidance only . Expense claims are a complicated area of taxation , and you should always consult your accountant if you have any questions .
www . taxsmartgroup . co . uk
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