Reply to: Benefit to claiming expenses?

[malvolio]

So you're through a brolly then?

No, I've been using a Limited Co for the last 20 years.

[jmo21]

And people wonder why HHMRC take a dim view of why we have our Limited Companies and why we will never be rid of IR35 and its bastard siblings. After 20 years in this game I remain appalled at just how ignorant some people are - or pretend to be...

So you're through a brolly then?

[malvolio]

The whole point of contracting through a Ltd is to maximise take home via expenses and dividends.

But yes, make sure you get how expenses work. You can save a lot of money in tax by expensing stuff. I'm trying to expense everything I can, although it's hard to find proper expenses.

And people wonder why HHMRC take a dim view of why we have our Limited Companies and why we will never be rid of IR35 and its bastard siblings. After 20 years in this game I remain appalled at just how ignorant some people are - or pretend to be...

[ujjain]

I was said to be a sockie here once, quiet a few times when I had beginner questions.

But yes, make sure you get how expenses work. You can save a lot of money in tax by expensing stuff. I'm trying to expense everything I can, although it's hard to find proper expenses. But it's beautiful... you don't first pay 45% tax and then buy a £619 iPhone, which requires 619/0.55=1124 gross salary, you pay 0% tax and in certain situations with £2000+ invoices on the flat-rate vat scheme even get the VAT back, so you pay half compared to all other people.

A good one you can probably still use would be "use of home as office". You create the expense for £216 (maximum amount without proof) and you just pay yourself £216 from your corporate bank account.

It's really worth it to learn about this stuff as a contractor. After all, it's your money, your accountant won't really care that much if you don't expense things that you could have expensed.

[pmasoft]

Company Expense vs Personal via SATR

You do not appear to be factoring in the VAT element in this comparison.

[PerfectStorm]

You lot are sockie-paranoid. What is the obsession on this forum?

[Sausage Surprise]

This whole thread is a wind up...right

[jmo21]

Appreciate the feedback even if some of it is patronising 😷

I started contracting and using a limited company 3 years ago. I didn't do enough research then and been naive since. Better late than never I guess lol

The whole point of contracting through a Ltd is to maximise take home via expenses and dividends.

I do question why your accountant did not point out to you in year 2 that you hadn't extracted the expense money your company owed you.

Yes, it may have accrued in your directors loan account, but I consider it incredibly lax of them to not have pointed that out.

[northernladuk]

Got to be a sockie windup.

I thought this as well at first but it is conceivable someone could fail this badly but...

I started contracting and using a limited company 3 years ago. I didn't do enough research then and been naive since. Better late than never I guess lol

3 years and don't know about expenses.. Not a chance. He'd have picked this up talking to other contractors etc. I've spent hours and hours discussing expenses and contractor related stuff. To not pick this up is well... sockietastic.

[Kenny@MyAccountantFriend]

My wording is not clear in my original message, so amended below:


Quote Originally Posted by Kenny@MyAccountantFriend View Post
If you are incurring business related expenses you would be better to claim these through the company thus saving Corporation Tax at 20% of the amount spend than paying the expenses personally where you may have had to draw a dividend to fund the purchase and therefore potentially paying personal tax on the dividends drawn if a higher rate tax payer.

[psychocandy]

The issue is the majority of accountants speak in accountancy terms and assume you to understand. If you understood it all then would there be any need for an accountant?

So to re-iterate and use an example,

For April 15 (new tax year) I will drive 2154 miles for work for which I pay for myself. My business expense claim will be £969.30. In May do I simply setup a bank transfer to my personal account for the expense amount and ensure this is tagged as this expense for accountancy purposes?

Yes mate but ultimately its your company not the accountants so you do need to understand a bit.
Not cool by the accountant mind not checking you understood. Get a new accountant if Iwere you that more meets your needs.

[psychocandy]

WTF!?!? My previous accountant never explained this to me. It was simply a case of stating this as an expense but I never did anything in regards to actual monies!

Other expenses I have come directly out of the business account but the business mileage is an expense claim i.e. no funds come direct from the business bank account for this. I simply pay for my own fuel each month from my personal account.

So how does this work each month in regards to the actual funds\money? Is it a case of doing a bank transfer for the mileage calculated and ensuring my accountant notes this as a monthly expense claim?

Got to be a sockie windup.

Are you serious? If so, I suggest you phone up companies house, close down your company, and get a permie job today.

YES expenses are paid from business to you personally BTW. Whats the point otherwise?

[psychocandy]

If you are incurring business related expenses you would be better to pay these through the company thus saving Corporation Tax at 20% of the amount spend than paying the expenses personally where you may have had to draw a dividend to fund the purchase and therefore potentially paying personal tax on the dividends drawn if a higher rate tax payer.

Corporation Tax (CT) and dividends are linked to each other as CT is payable at 20% on the company profits and the remaining 80% is what can be drawn as a dividend from the company.

If incurring expenses it would always be better to claim for them via the company than pay for them personally.

Kenny - is this a wind up?

Why does it matter if an expense is paid via company? Its an expense claim so company reimburses the person anyway.

[robz8701]

Appreciate the feedback even if some of it is patronising 😷

I started contracting and using a limited company 3 years ago. I didn't do enough research then and been naive since. Better late than never I guess lol

[ASB]

No, you claim through the company.

Only if you would otherwise leave that money in the company. If you took it as a divvy, you'd still pay higher rate tax on it. For most people, the money they take as expenses is money they won't need to take at a higher rate tax band.

a) You do not HAVE to claim it through the company. What are allowable expenses and what the company expense policy is are two different (but often aligned) things.

b) Yes. If it is drawn as dividend from the company then the extra tax on the dividend negates any advantage.

c) As I alluded to in my original comment it depends on sources of income. If you have flexibility and are able to reduce the amount paid at higher rate to less than the expenses then there is a potential advantage in claiming the expenses via SATR rather than claiming it through the company. It depends on sources of income

The situations where it arises are unusual, but possible. e.g. a 50k a year job and a business which does cause a certain amount of expenses to be paid and also not drawing from this business in any form. Highly unusual.

It is highly probable that any saving is tiny and not really worth the effort of chasing.

edit: If I get time later I will do a worked example.