away from home.. claiming

[Cirrus]

T the only exception is VAT (which more or less stays in it's own ring fence

I don't think so.

You have VAT coming in and you pay VAT to the Revenue. The difference is earnings, subject to CT.

[TheCyclingProgrammer]

I don't think so.

You have VAT coming in and you pay VAT to the Revenue. The difference is earnings, subject to CT.

On the flat rate scheme, but on the normal scheme what Andy said is essentially correct.

[cjonline]

This example is exactly what im looking for

actually, I've been doing some figures of my own..

WITHOUT EXPENSES

billing - £18,000
salary - £5000
gross (taxable) - £13,000
@20% = £2,600

Net - £10,400

WITH EXPENSES

billing - £18,000
salary - £5000
expenses - £500
gross (taxable) - £12,500
@20% = £2,500

Net - £10,000

So, basically, yes I would pay less tax but my net income would be less when adding expenses.
Is this right?

C

[malvolio]

actually, I've been doing some figures of my own..

WITHOUT EXPENSES

billing - £18,000
salary - £5000
gross (taxable) - £13,000
@20% = £2,600

Net - £10,400

WITH EXPENSES

billing - £18,000
salary - £5000
expenses - £500
gross (taxable) - £12,500
@20% = £2,500

Net - £10,000

So, basically, yes I would pay less tax but my net income would be less when adding expenses.
Is this right?

C

On those numbers, yes. The point is, expenses are supposed to be revenue neutral, i.e. if you personally are paying for stuff out of your taxed income that is actually a cost to the business you should not lose out the tax element that you personally are not liable for.

The basic line is that if you're making a profit (or a loss) out of your net expense claims then basically you are doing something wrong.

The far more sensible idea is to get YourCo to pay its own bills so it never goes anywhere near your income...

[cjonline]

On those numbers, yes. The point is, expenses are supposed to be revenue neutral, i.e. if you personally are paying for stuff out of your taxed income that is actually a cost to the business you should not lose out the tax element that you personally are not liable for.

The basic line is that if you're making a profit (or a loss) out of your net expense claims then basically you are doing something wrong.

The far more sensible idea is to get YourCo to pay its own bills so it never goes anywhere near your income...

got you!

I suppose I've been giving advice to spend as much money as possible and claim it back, ie I've been paying for parking and lunches, but I could use the free car park and bring a sandwich in from home and maximize the net income. I suppose the same would also be for equipment.l. ie, why buy a laptop if I have one already.

[SueEllen]

got you!

I suppose I've been giving advice to spend as much money as possible and claim it back, ie I've been paying for parking and lunches, but I could use the free car park and bring a sandwich in from home and maximize the net income. I suppose the same would also be for equipment.l. ie, why buy a laptop if I have one already.

Who ever gave you that advice is an idiot.

Only spend what you need. So if the free car park is fine use that.

[cjonline]

Who ever gave you that advice is an idiot.

Only spend what you need. So if the free car park is fine use that.

folks on here and the accountant!

[SueEllen]

folks on here and the accountant!

You've got the wrong end of the stick.

Expenses work out neutral because they are for you to carry out your business.

In reality the less expenses you have the more profit your company makes. It is however better for you to expense something rather than pay it out of your own income, as the former is done before tax and the latter after tax.

However financial commonsense dictates if there is a cheaper alternative that is of the same or similar standard, you spend the money on the cheapest alternative rather than paying.

So if the free car park is as adequate as the paid parking, then you use the free parking. If your car is going to get scratched in the free parking due to narrower parking spaces and it's a luxury brand, then use the paid parking.

In the case of lunch it would probably cost you a couple of pounds to bring your lunch in compared to £5 to buy it. So even with the tax advantage of your business buying lunch, you would save over 20% (or whatever the corp tax rate is) by buying and bringing in your own lunch from home.

[SueEllen]

away from home.. claiming

I forgot to add first time contractors always sit there with calculators.

In reality calculators cannot tell you the additional expenses of when you have to pay to get a taxi part way home, when you are forced to take a week off as the client has no work for you, etc.

Most importantly they cannot tell you the expense of having a contract pulled because a project is canned after a month and you have to look for another contract.

[LisaContractorUmbrella]

I have one.. but i didnt understand the tax/revenue/profit stuff

As the Director of a Limited Company you have certain responsibilities and it's important that you realise that right from the start otherwise you could find yourself getting in one unholy muddle. Not every contractor is cut out to run their own company, in which case you have the option to work through an umbrella company instead, but you need to make sure that you give yourself the best chance possible. There are lots of guides on here and yes I know accountancy/tax don't make the best bedtime reading but you do need to understand what they contain. Your accountant will help you but your company is not their responsibility; if you don't understand what they're talking about then say so and ask questions until you do understand