Expenses to turnover percentage

[johndc31]

I've just done a small review of the accounts and my expenses are approx 50% of the turnover, which I think is quite high. Most of the high expenses come from either accommodation (hotels, roomshare) and millage. In fact, a lot of millage. So for the remainder of the year I'm going to do my best to keep them down, cheaper hotels etc.
Being a contractor, and as it's my first year trading, I'm a nervous newbie, and really don't want to trigger any red flags with HMRC even though all my accounts are accurate, legitimate and I have receipts accountable for everything. I was just wondering if this percentage is pretty normal amongst contractors.

[chopper]

I've just done a small review of the accounts and my expenses are approx 50% of the turnover, which I think is quite high. Most of the high expenses come from either accommodation (hotels, roomshare) and millage. In fact, a lot of millage. So for the remainder of the year I'm going to do my best to keep them down, cheaper hotels etc.
Being a contractor, and as it's my first year trading, I'm a nervous newbie, and really don't want to trigger any red flags with HMRC even though all my accounts are accurate, legitimate and I have receipts accountable for everything. I was just wondering if this percentage is pretty normal amongst contractors.

50% is exceedingly high, it means you're probably not building up a warchest, and that you're probably staying in some swanky hotels rather than trying to keep your costs down.

HMRC don't care whether you are staying in a room that is £30 or £300 a night, as long as it is wholly and exclusively for business. It is up to your business to decide how lavish your wholly and exclusive for business hotel room is.

With such massive expenses, I hope you're not on the VAT Flat Rate Scheme.

WDYAS?

[johndc31]

50% is exceedingly high, it means you're probably not building up a warchest, and that you're probably staying in some swanky hotels rather than trying to keep your costs down.

HMRC don't care whether you are staying in a room that is £30 or £300 a night, as long as it is wholly and exclusively for business. It is up to your business to decide how lavish your wholly and exclusive for business hotel room is.

With such massive expenses, I hope you're not on the VAT Flat Rate Scheme.

WDYAS?

Not really, I stayed in London for 4 months, hotels were reasonable, not more than £200 for 4 nights, commuted back to Manchester at weekends. Mostly driven back by car, but some weekends by train, all depended on how much Virgin wanted for the ride.
I am on FRS yes, so you pretty much answered the question, this is isn't the norm eak!

[TheCyclingProgrammer]

My annual expenses are fairly fixed as I don't work on-site much, maybe 20% of my time at most. Annual costs including salaries tends to be around £15-18k.

[johndc31]

My annual expenses are fairly fixed as I don't work on-site much, maybe 20% of my time at most. Annual costs including salaries tends to be around £15-18k.

Yeah makes around right, it seems on-site during the week naturally bumps things up considerably which makes me think whether FRS was a good choice. I'll speak with my accountant.

[VectraMan]

Ouch. The good thing about WFH is my expenses are almost zero: Insurance and bank charges plus the occasional trip for a meeting is all.

Remember that not everything is VATable - train tickets won't count, and if the accommodation you're paying for isn't with a VAT registered hotel it won't either. So you may still be better off on the FRS even with high expenses.

[VillageContractor]

I'm at client site most of the time, and my expenses for a yr are about £9k. You definitely need to look at your books because it looks at though you're even on a really low rate (£100pd) or you've done something wrong.

[LondonManc]

Not really, I stayed in London for 4 months, hotels were reasonable, not more than £200 for 4 nights, commuted back to Manchester at weekends. Mostly driven back by car, but some weekends by train, all depended on how much Virgin wanted for the ride.
I am on FRS yes, so you pretty much answered the question, this is isn't the norm eak!

I wouldn't panic about your expenses if they're legit.

Hotels at £200pw max = £10,000 pa max
Drive from Manchester to London - 20,000 miles pa.
Therefore expenses of £7,000 (first 10k @45p, 25p thereafter)

Your turnover must be absolute turd, especially for a London gig. Either that or you're claiming for other things that put you on dodgy ground.

[Lance]

I'm at client site most of the time, and my expenses for a yr are about £9k. You definitely need to look at your books because it looks at though you're even on a really low rate (£100pd) or you've done something wrong.

what he says.......

My max expenses was around £15k per year whilst staying away 3 or 4 nights a week and spending most evenings on the p*ss. That wasn't London but I did drink a lot.
Anything over £20k, even for London, would suggest too much fancy living.
That's not a problem though. It's a choice. Are you happy with it?
If you're single and enjoying your time in London then 'so what?'
And if you're managing to get receipts from 'Gentleman's clubs' check with your accountant if that's going to be OK.

[LondonManc]

what he says.......

My max expenses was around £15k per year whilst staying away 3 or 4 nights a week and spending most evenings on the p*ss. That wasn't London but I did drink a lot.
Anything over £20k, even for London, would suggest too much fancy living.
That's not a problem though. It's a choice. Are you happy with it?
If you're single and enjoying your time in London then 'so what?'
And if you're managing to get receipts from 'Gentleman's clubs' check with your accountant if that's going to be OK.

Rubbish. It very much depends on where you live and how you get to London.