What Can I Include On Company Expenses, To Reduce Tax Bill?

[Techforcer]

Hi Guys,

I'm new to contracting, and have just started my second position.

Inbetween, I spend 2 months over the summer on the hunt for a new contract... Is there any way I can put a figure through the company for use of my home office/heating/lighting, or anything like that?

Also, is there much else I can put through the company? I'm currently putting through:

IT Purchases
Car parking & mileage
Hotels needed
Mobile Phone

What about some kind of subsistence?

I know these are basics, but your advice is really appreciated.

Cheers,
TF

[Clare@InTouch]

From an expenses point of view you can claim anything that you need in order to run the business. If there’s a personal benefit there will likely be a personal tax implication. You're the one best placed to know what you need, but some ideas that tend to be universal:

Eye tests
Computer equipment
Postage & stationery
Books & technical manuals
Professional subscriptions
Insurances – professional indemnity, public liability
Travel to the client site – but do not claim petrol, that’s covered in mileage
Lunch, if you’re out on business all day (claim the actual amount, never round sums)
Breakfast if you have an unusual early start
Dinner if you have an unusual late finish
If you’re staying overnight you can claim the cost of accommodation, plus a round £5 overnight allowance (or £10 if abroad)
You can claim the cost of a yearly staff function where you can spend up to £150 per person.

There are other items you can pay for through the company, but they should come direct from the bank itself, not be expenses claimed:

The cost of your mobile 'phone if you get the contract swapped into the company name
Contributions into your personal pension
Payments for a registered childminder – up to £55 a week (as long as your salary is within the basic rate tax band)

You can claim a flat £4 a week for use of home, or more if you actually work from home on a regular basis and can prove your home costs increase as a result.

If you're not sure about a specific item just ask your accountant, they should be able to give you a simple yes/no/maybe.

[Sockpuppet]

Bear in mind there is no point in spending 80% to save 20%. I.e. don't buy something for £10 just to save £2 in tax if you don't need it.

[jmo21]

Bear in mind there is no point in spending 80% to save 20%. I.e. don't buy something for £10 just to save £2 in tax if you don't need it.

This might be the most important point about expenses/corp tax saving for newbies to get their head round - expensing something does not make it "free".

[northernladuk]

I know these are basics, but your advice is really appreciated.

That doesn't even cover it. There are 100's of guides on the web, there are guides on the big contractor sites and there are guides on the right hand side which has actually been labelled 'Contractor Expenses' to try and help the lazy and the feckless.

Ultimately you should be looking for a guide and a chat with your accountant who knows your business and will explain his risk level.

[The Spartan]

Bear in mind there is no point in spending 80% to save 20%. I.e. don't buy something for £10 just to save £2 in tax if you don't need it.

Spot on there, NLUK has said this 1000's of times and still some people don't understand it lol

[xoggoth]

Amazingly the HMRC website is quite good:

HM Revenue & Customs: Expenses and benefits A to Z

[northernladuk]

And don't forget it isn't just a matter of scanning a list and applying it on face value. Many of these expenses have some pretty tight rules around them. For example the phone contract must be in the company name and paid from the company account. Subsistence and mileage has the 2 year (or 40%) rule to consider and so on.

[The Spartan]

Subsistence and mileage has the 2 year (or 40%) rule to consider and so on.

A very pertinent point oh Northern one

[MonkeyWorld]

Health assessment, I.e. bupa health check ;-)