Expenses - The Do's, Don'ts and damn right murky!

[Notascooby]

Bit of research does wonders. Lots of guides with it all in one place out there.


or one of the multitudes of guides out there.

Dear NLUK - if you're going to tout the google search then at least find something useful - I already employ SJD and have read the attached, did it mention Income protection or life policies did it hell.

I do find your normal "not cut out" stuff quite funny but this is as good as useless.

The Nixon Williams guide is pretty good and covers most of what i already know, it does mention the BIK for medical insurance and does bring up the contentious item of lunches.

But again is sadly lacking income and life policy information, which again is why I think this info could be handy for others.

[Waldorf]

This one is useful and a bit more detailed:
<snip>

[northernladuk]

Bit of research does wonders. Lots of guides with it all in one place out there.

or one of the multitudes of guides out there.

[Notascooby]

Super - so some more worthwhile information.

So the life insurance that isn't a BIK - is called a relevant life policy and the like of the Pru and Bright Grey do this.
£1/2M insurance is about is around £40-43 per month for 39 year old, covering 21 years until 60.

Then Enterprise Income Protection, i.e the po9licy is in the business name and is paid to the business is also allowable and free of BIK. Insurance for £40K per year to the business with a 6 month deferral period is looking like £54 per month. Again Bright Grey provide this as do Unum Provident (who have a Q&A facility). Bright Grey will cover up to 50% earnings and Unum up to 80%. Be aware that you need to be able to show you're earning this to qualify for the full payout, so no point in insuring yourself for 80K if you're sticking to the 40% threshold as I don't think it's what the company earns but what you earn (to verify).

Any more, allowable expenses? - Google is a great thing but it's handier to have things in one place.

[Clare@InTouch]

Incorporation fee falls under the "allowable expense but not CT deductible" category I believe. Don't ask me why, something to do with being a one off capital cost.

Agreed. HMRC guidance here:

BIM46435 - Specific deductions: professional fees: capital structure of business - Expenditure is capital

Fees incurred in connection with the acquisition, alteration, enhancement or defence of the fundamental structure of a business are generally capital, for instance the cost of:

forming, renewing, varying or dissolving a partnership,
negotiating a merger between companies or partnerships,
forming and registering a company, or changing a company's status, for example, from limited to unlimited status or to a PLC,
defending against a petition by shareholders to wind up a company,

Specific deductions: professional fees: capital structure of business

You also cannot claim any VAT thereon.

[Contreras]

So, company formation, insurance, travel, accountants, equipment, software, books and journals, bicycle, accommodation when staying away, annual event up to £150 per head (questions on whether or not this covers a full swingers party), charitable donations. This is all good...

Incorporation fee falls under the "allowable expense but not CT deductible" category I believe. Don't ask me why, something to do with being a one off capital cost.

[Clare@InTouch]

Forgot pension, use of home, phone and childcare vouchers...

Cheers Claire - OK I'll caveat for the general IT population then.

So I want to claim life and income protection - on a general basis, best just to take the hit from div payments or is the BIK route worth it?

There's not a massive difference in cost to you either way. If the policy is say £1,000, then off hand calculations would give:

£1,000 dividend in higher rates would give rise to tax liability of £250.

£1,000 as a BIK would save £200 in CT but cost £200 in personal tax (assuming basic rate) and £138 in Employers NI. You'd then save another £27 in CT on the NI. Net cost £111. But, the BIK forms part of your income for tax band purposes, so you can take £1,000 less before higher rates of tax kick in.

If your dividends are within the basic rate band then you're better off paying it personally.

[Notascooby]

Please tell me you don't think Notascooby is my sockie.

LOL - yes I am - I / You only posted this to tell me to search - no why didn't you / I put a link to the FAQ search thread.

Arse this is confusing, I'm going to stick with being MF for the rest of the day - just as soon as I neg rep everyone except myself (the MF-self that is).

[northernladuk]

Good morning NLUK

Please tell me you don't think Notascooby is my sockie.

[northernladuk]

You have tried doing a search on all the topics you mention? I don't believe you will uncover anything that hasn't been tried before. Most of them I think you should be able to work out yourself if you think about it. Put some effort in man

As an example..

Life insurance

life insurance site:forums.contractoruk.com

http://www.google.co.uk/search?q=lif...w=1280&bih=864

[Notascooby]

Gym membership is a benefit in kind.

Life insurance usually is too, although you can get some policies that aren't. Talk to an IFA on that one.

Generally if it's wholly and necessarily for business reasons you can claim it. If there's a personal benefit then there will be personal tax implications. Clothing, gym, cars, healthcare etc all result in BIK.

There are notable exceptions to this such as contributions to your personal pension up to £50k, childcare up to £55 a week (for basic rate salary taxpayers), eye tests if you work with computers, mobile phones in the company name, use of home.

I just advise clients to email me if they ever want a quick yes or no to a suggested claim as it's difficult to give a hard & fast list that applies to everyone. Something that you can't claim may be allowable for someone else because of the nature of their trade.

Forgot pension, use of home, phone and childcare vouchers...

Cheers Claire - OK I'll caveat for the general IT population then.

So I want to claim life and income protection - on a general basis, best just to take the hit from div payments or is the BIK route worth it?

[Clare@InTouch]

Gym membership is a benefit in kind.

Life insurance usually is too, although you can get some policies that aren't. Talk to an IFA on that one.

Generally if it's wholly and necessarily for business reasons you can claim it. If there's a personal benefit then there will be personal tax implications. Clothing, gym, cars, healthcare etc all result in BIK.

There are notable exceptions to this such as contributions to your personal pension up to £50k, childcare up to £55 a week (for basic rate salary taxpayers), eye tests if you work with computers, mobile phones in the company name, use of home.

I just advise clients to email me if they ever want a quick yes or no to a suggested claim as it's difficult to give a hard & fast list that applies to everyone. Something that you can't claim may be allowable for someone else because of the nature of their trade.

[TheDragon]

OK - done to death but usually a specific point, such as Christmas party, subsistence allowance etc.

So I've read the CUK Navigation on Contractor Expenses, I've even trawled through the 480.pdf and I WILL check it with my accountant....

So, company formation, insurance, travel, accountants, equipment, software, books and journals, bicycle, accommodation when staying away, annual event up to £150 per head (questions on whether or not this covers a full swingers party), charitable donations. This is all good...

Then comes the murky - If I offer gym membership, if I offer life, health, sickness insurance, PCG membership (allowable expense but not CT deductable) client entertainment, daily subsistence etc...

Which of these can be put through as expenses, which incur BIK i.e. who benefits from sickness insurance, the company or the director or both?

If you're already in the 40% tax bracket, do some things start to be more cost effective to take a BIK hit, where as if under the 40% threshold they're not?

This isn’t big money items (unless you count the Vegas AGM business class flights) but they could make a small difference. I.E. I’m keen to get some income protection / life assurance sorted out as this is a permie benefit that is bloody handy when married with kids.

Happy to have a link to an all encompassing thread if this is done – if so maybe it should be a sticky?

(I was going to put this in general but it maybe quite handy to have a one-stop-shop of advice)

Good morning NLUK

[Notascooby]

OK - done to death but usually a specific point, such as Christmas party, subsistence allowance etc.

So I've read the CUK Navigation on Contractor Expenses, I've even trawled through the 480.pdf and I WILL check it with my accountant....

So, company formation, insurance, travel, accountants, equipment, software, books and journals, bicycle, accommodation when staying away, annual event up to £150 per head (questions on whether or not this covers a full swingers party), charitable donations. This is all good...

Then comes the murky - If I offer gym membership, if I offer life, health, sickness insurance, PCG membership (allowable expense but not CT deductable) client entertainment, daily subsistence etc...

Then comes the downright dodgy - the 52" plasma for presentations, the AGM in Vegas for the Director and Secretary etc.

Which of these can be put through as expenses, which incur BIK i.e. who benefits from sickness insurance, the company or the director or both?

If you're already in the 40% tax bracket, do some things start to be more cost effective to take a BIK hit, where as if under the 40% threshold they're not?

This isn’t big money items (unless you count the Vegas AGM business class flights) but they could make a small difference. I.E. I’m keen to get some income protection / life assurance sorted out as this is a permie benefit that is bloody handy when married with kids.

Happy to have a link to an all encompassing thread if this is done – if so maybe it should be a sticky?

(I was going to put this in general but it maybe quite handy to have a one-stop-shop of advice)