Last month we looked at allowable expenses for self-employed workers. We pointed out that limited company rules on expenses are different and that we would look at those separately, which is precisely what we are doing in this post.
What are allowable expenses for a limited company?
The key rule to follow concerning limited company expenses is that they must be genuine. In other words, the expense must be something that was incurred exclusively, wholly and necessarily during the course of running your business.
Expenses that cross over both business and personal use cannot be claimed. It is important to retain all receipts and invoices so that if it becomes necessary, you can prove that your expenses claims were genuine.
What are typical limited company expenses that can be claimed for?
The following are some of the allowable expenses which can be set off against Corporation Tax:
Salaries – all PAYE salaries including directors and staff.
Subcontractor fees – if you engage subcontractors or freelancers to undertake work for your business then these will be classed as allowable expenses.
Pension contributions – all pension contributions paid to staff, providing they are made via an approved scheme.
Employer’s National Insurance Contributions – any contributions payable on employee salaries can be claimed for.
Travel and parking costs – travel expenses is another topic that needs its own dedicated post which we will cover in the future but suffice to say in general that most travelling costs will be classed as allowable expenses. Company car expenses can also be claimed, although there is a benefit in kind charge for private use.
Accommodation costs – if you are staying away from your normal place of business then you can claim accommodation costs, providing you do not claim for more than 24 months at a temporary place of work.
Subsistence costs – you can claim for subsistence whilst away from your normal place of work, but again as with accommodation costs, you cannot claim if you have exceeded 24 months at a temporary place of work. Incidental overnight expenses can be claimed at £5 per might or £10 per night if abroad should you be working away from home.
Training fees – providing the training delivers skills that are relevant to your business then you can claim for the costs involved.
Business insurance – all genuine business insurances such as employer’s liability, professional indemnity, property and vehicle insurance are classed as allowable expenses.
Telephone, mobile and internet fees – providing the contracts are in the name of the business you can offset the costs against your Corporation Tax. If you work from home then you can claim the cost of business calls made from your residential telephone line.
Use of home as office – home workers can claim £4 per week without receipts, or calculate a proportion of the household bills.
Computer equipment – all computer equipment and software used for business purposes can be claimed for.
Advertising and marketing costs – anything you spend on promoting your business is an allowable expense.
Business gifts – you may gift up to £50 per individual before complex rules apply.
Professional fees – anything you spend on accountants, solicitors, surveyors, etc. can be claimed for.
Health care – any employee who uses a computer is entitled to an eye test, the cost of which you can claim for. You can also claim for annual employee health checks.
It is advisable to always consult with your bookkeepers or accountant if you are unsure as to whether an expense is a genuine business one that can be included in your Corporation Tax return.