contracting newbie...expenses

[Contreras]

This is why you should be asking your accountant and not an internet board. Not a bad effort but missing some pretty key points...

Uhuh.

Writing down your mileage is hardly proof. I don't know anyone that does this.

If I tried to use the odometer to record mileage then more often than not I would forget, so I rely on Google route maps instead. The fact that the journey actually took place is evidenced in other ways. Not everything can, or must, be proven beyond doubt but if you can show diligence and effective record keeping then it's less likely to be challenged.

They will know you didn't pocket the money because you have a receipt. You don't need to use the business card. You can expense it back to yourself.

You don't need to use the business card although it's still sound advice for various reasons. Receipts are needed as evidence of the expense, but bank statements can fulfil that role as well. And enough people believe in using a business card as a way to avoid declaring stuff on P11D that it's almost true.

You can claim VAT on purchases over 3k on a single receipt.

That'll be £2k VAT inclusive, then.

[northernladuk]

As I said.. and proved... Speak to someone that knows what they are talking about I.e. your accountant.

Now could someone pass me my coat and call a taxi for one.

[Batcher]

However as you are on flat rate VAT you can't reclaim any VAT so this won't apply to you.

Really? Another good example of why you should be asking an accountant.

[TheFaQQer]

I think to summarise
Which card should I be paying for which purchases on

The business card where possible, and a personal one where not possible.

Which reciepts should I be keeping

Everything business related. Scan them and keep the copy if you don't want to keep the actual paper copy.

[TheCyclingProgrammer]

FWIW, if we're talking about personal out of pocket expenses that *you* incur in the course of your job: stuff like business travel, subsistence, possibly accommodation and other allowable incidentals then it doesn't necessarily make a difference whether you pay personally and reclaim or pay it on the company direct debit card - certain expenses will still need to be reported on your P11D anyway unless you have a dispensation (business travel mainly) and will need to be re-claimed on your self-assessment to avoid paying tax.

If the expense is a *company* expense then you should always try and pay for it from your business directly. This would generally include things like office equipment, bills in the company name etc. If you do have to pay for a company expense on your personal card then you should still make the supplier aware that you are purchasing on the company's behalf and make sure any receipt/invoice is issued in the company name - this is especially important when purchasing assets as you need to show that the asset is the company's, not yours. These payments shouldn't need to go on your P11D and you can even treat them as director's loans in your books rather than expense claims (to make it clear that the company you've effectively loaned the company the money to pay its bill).

[madge2014]

Thanks all

So .. I've just received my first invoice payment and the business account is no longer on 00.00p hurrah

So I have a spreadsheet that calculates how much of my net payment I need to set aside from the total amount for tax liability (20% corp + 13.5% flat rate VAT)

I am not paying myself a salary as I had already earnt over the threshold this year at me previous permanent employer.

Let's say for argument sake that after tax liability has been deducted from my invoice total. I have a nice round some of say £3000 left

The only "expenses" I have had in the last month are mileage

11 days in June @ 100 miles each day
1100 x 0.45p per mile = £495

I am a tad confused as I thought I would be able to xfer the full £3000 over to my personal account to do what I wanted with.

My accountant says however that the maximum I should withdraw is 3000 - £495 (expenses) = £2505

This is the part I can't get my head around.
What now happens to the £495 that is left in the business account ? How do I / can I get my hands on it. Is there a reason I've been told not to withdraw it ? Or do I just withdraw it to another account and tag it "expense claw back"

The only expenses I will ever have going forward are
Mileage
Indemnity insurance - direct debit out of the business account
Website costs - direct debit out of the business account.

Yes I am seeing my accountant later this week but just though I would run it by the seasoned veterans on here first as I'm a tad confused.

Thanks in advance

[tractor]

...

Thanks all

So .. I've just received my first invoice payment and the business account is no longer on 00.00p hurrah

So I have a spreadsheet that calculates how much of my net payment I need to set aside from the total amount for tax liability (20% corp + 13.5% flat rate VAT)

I am not paying myself a salary as I had already earnt over the threshold this year at me previous permanent employer.

Let's say for argument sake that after tax liability has been deducted from my invoice total. I have a nice round some of say £3000 left

The only "expenses" I have had in the last month are mileage

11 days in June @ 100 miles each day
1100 x 0.45p per mile = £495

I am a tad confused as I thought I would be able to xfer the full £3000 over to my personal account to do what I wanted with.

My accountant says however that the maximum I should withdraw is 3000 - £495 (expenses) = £2505

This is the part I can't get my head around.
What now happens to the £495 that is left in the business account ? How do I / can I get my hands on it. Is there a reason I've been told not to withdraw it ? Or do I just withdraw it to another account and tag it "expense claw back"

The only expenses I will ever have going forward are
Mileage
Indemnity insurance - direct debit out of the business account
Website costs - direct debit out of the business account.

Yes I am seeing my accountant later this week but just though I would run it by the seasoned veterans on here first as I'm a tad confused.

Thanks in advance

You need to factor in expenses like accountancy costs (which maybe won't even hit you until next year), annual shuttle fee costs and other administrative charges (they don't amount to a huge deal though) plus other unforseen charges, so best advice is to build up a residue of capital (it's up to you how much, only you know your circumstances) and leave that in the company.

[Contreras]

Thanks all

So .. I've just received my first invoice payment and the business account is no longer on 00.00p hurrah

So I have a spreadsheet that calculates how much of my net payment I need to set aside from the total amount for tax liability (20% corp + 13.5% flat rate VAT)

That's a simplistic and flawed calculation for anything but an estimate. To be fair it's probably on the safe side though.

I am not paying myself a salary as I had already earnt over the threshold this year at me previous permanent employer.

Bear in mind that dividends will incur a personal tax liability if they take you into the high rate band or if you're a high rate payer already.

Let's say for argument sake that after tax liability has been deducted from my invoice total. I have a nice round some of say £3000 left

As said, that's an estimate, it might actually be more or less.

The only "expenses" I have had in the last month are mileage

11 days in June @ 100 miles each day
1100 x 0.45p per mile = £495

Fyi, at that rate you'll breach the 10,000 mile threshold in 20 weeks, 25p/mile thereafter.

I am a tad confused as I thought I would be able to xfer the full £3000 over to my personal account to do what I wanted with.

My accountant says however that the maximum I should withdraw is 3000 - £495 (expenses) = £2505

This is the part I can't get my head around.

Me neither. Ask him/her to explain their advice.

What now happens to the £495 that is left in the business account ? How do I / can I get my hands on it. Is there a reason I've been told not to withdraw it ? Or do I just withdraw it to another account and tag it "expense claw back"

That should be the easy bit. Either pay it to your personal account or transfer it (bookkeeping entry) to your director's loan account. Think of the DLA as a running tab of what the company owes you (or vice versa).

The only expenses I will ever have going forward are
Mileage
Indemnity insurance - direct debit out of the business account
Website costs - direct debit out of the business account

Accountants fee?
New laptop / mobile phone ?
Share capital? VAT liability?
Anything else?

Try to keep a 'safety buffer' of funds in the company over and above the estimated distributable reserves. Remember that you can always take it out next year.

Whatever you do, be be sure to keep clear records. There's no set format to this, except that your accountant should be able to make sense of it.

[stek]

Thanks all

So .. I've just received my first invoice payment and the business account is no longer on 00.00p hurrah

So I have a spreadsheet that calculates how much of my net payment I need to set aside from the total amount for tax liability (20% corp + 13.5% flat rate VAT)

I am not paying myself a salary as I had already earnt over the threshold this year at me previous permanent employer.

Let's say for argument sake that after tax liability has been deducted from my invoice total. I have a nice round some of say £3000 left

The only "expenses" I have had in the last month are mileage

11 days in June @ 100 miles each day
1100 x 0.45p per mile = £495

I am a tad confused as I thought I would be able to xfer the full £3000 over to my personal account to do what I wanted with.

My accountant says however that the maximum I should withdraw is 3000 - £495 (expenses) = £2505

This is the part I can't get my head around.
What now happens to the £495 that is left in the business account ? How do I / can I get my hands on it. Is there a reason I've been told not to withdraw it ? Or do I just withdraw it to another account and tag it "expense claw back"

The only expenses I will ever have going forward are
Mileage
Indemnity insurance - direct debit out of the business account
Website costs - direct debit out of the business account.

Yes I am seeing my accountant later this week but just though I would run it by the seasoned veterans on here first as I'm a tad confused.

Thanks in advance

Accountancy fees? PCG Membership?

Anyway, you can draw as much as you like providing you leave enough to pay VAT/PAYE/CT etc, just you will probably be taxed at the higher rate on whatever you draw over the threshold.

That's probably what your accountant is protecting you from but why not ask him/her/it?

[TheFaQQer]

I am a tad confused as I thought I would be able to xfer the full £3000 over to my personal account to do what I wanted with.

My accountant says however that the maximum I should withdraw is 3000 - £495 (expenses) = £2505

I suspect that your accountant has said that £2505 is available for payment as dividends and/or salary - the £495 should be reimbursed to you first, if you are claiming those expenses. Make sure you understand exactly what every payment from your company to you is for - you don't want to be mixing everything into one payment and then trying to get someone to sort it out later on.

The only expenses I will ever have going forward are
Mileage
Indemnity insurance - direct debit out of the business account
Website costs - direct debit out of the business account.

That seems worryingly naive, unless this is the only contract that you plan to have (which opens a whole other can of worms). If you finish this contract and the next one is away from home, will you not incur some additional expenses there? What about childcare, accountancy, bank charges, food, postage, penalty charges, non mileage travel, entertainment....