expenses

[negar]

I have set up a limited company as i will be contracting but i am a little confused about how expenses. When claiming expenses for travel and computer and stuff like that will i get all the money back or just the tax on the items!!!!

[el duder]

I have set up a limited company as i will be contracting but i am a little confused about how expenses. When claiming expenses for travel and computer and stuff like that will i get all the money back or just the tax on the items!!!!

some expenses claimed on behalf of the company for computer and stuff like that - as you have said, can be taken from the company once you have the money in the account, tax free.

so if you paid £1000 for a business laptop on your credit card, you could pay the £1000 off, from you business account without having to tax it first.

oh yeah.

keep the invoice and reciept.

[malvolio]

Thud....

I assume by "tax" you mean VAT?

If your company pays for them, it has obviously paid for all of the cost, and you can offset the VAT element against your next bill if you are not going for the flat rate thing.

If you pay for them then (a) why? and (b) you can claim the full cost back from the company as above. Expenses and stuff will eventually need to be declared in case there is a benefit in kind, but I'm not going into that now - ask your accountant (ermm, you do have an accountant, don't you?)

If you haven't even learned that level of basic knowledge, I suggest you are in more trouble than you realise. Go read the first timer guides on this site and at www.pcg.org.uk (and join the PCG while you're at it - I think you'll need the help!) and it will all become a lot clearer. Anything you don't then understand, feel free to ask the guys on here.

[expat]

I have set up a limited company as i will be contracting but i am a little confused about how expenses. When claiming expenses for travel and computer and stuff like that will i get all the money back or just the tax on the items!!!!

Claiming what from whom?

I'm not being pedantic, the answer to that question will help you to answer your question, and understand it.

If you claim the expenses from the client, you will get whatever the contract says you'll get. If it doesn't say you'll get anything, you probably can't claim from the client.

Claim as an expense against tax? Well, precisely what you're doing there is:
a) claiming that it is a legitimate business expense and therefore you can claim back the VAT that you paid on it, against VAT that you collect from clients.
b) claiming that it is a legitimate business expense and therefore that the money that you used to pay for it belonged to the Ltd Co - as against the money having been given to you first for you to spend on something personal; that 2nd case would have been salary and so you would have to pay tax on it, but if it's a business expense and not salary, you don't have to pay tax on it.

You're not asking the taxman to actually buy it for you. He wouldn't see a good reason why he should do that.

(If you prefer, another way of saying the same thing is that you personally claim the expense from your Ltd Co. It pays you in full - but obviously it then has less money available to pay you in salary).

[VectraMan]

Some maths:

Say you earn £1000 per week and you're into the 40% bracket. Your earnings are £1000 - 40% (£400) = £600 (I know that's not actually how it works, but for the example's sake).

But you have £100 expenses. So you refund yourself £100, then there's £900 left so you earn £900 - 40% = £540. Adding on the £100 you've already refunded yourself means £640 per week. Or £40 more.

By a staggering coincidence, £40 = 40% of your £100 expenses. So yes at the end of the day you're personally refunded the tax on expenses, not the actual amount. A bit hard to get your head around, and it confused me a lot when I started.

Of course this means if you're smart enough to go Ltd. and pay as little tax as possible, you're getting less of the expenses refunded to you than if you went with an umbrella and paid the full amount of tax an employee would.