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Contractor Expenses FAQ

 

What expenses can I claim through my Limited Company?

There are so many myths and misinformation around what you can and can’t claim as a contractor working outside of IR35. The following is not a definitive list, but you can rely on its accuracy and if you have any other questions about expenses – just pick up the phone and ask.

The only legal stipulation around each of the following is that the expenses incurred are ‘wholly, exclusively and necessarily’ for running your business:

  • Travelling (subject to the 24 month rule)
  • Business mileage (subject to the 24 month rule)
  • Business parking and congestion charges (subject to the 24 month rule)
  • Accommodation (if required to work away from home overnight)
  • Subsistence (evening meals relating to the above and a flat rate to cover incidental costs)
  • Mobile phone bills (if in the name of the limited company)
  • Bank interest and charges (company held accounts only)
  • Professional subscriptions/memberships
  • Accountancy fees
  • Legal and professional fees (relating to the company only)
  • Printing, postage and stationery
  • Fixed assets required for business activities of the company (NB. Be aware of HMRC’s “duality of purpose” argument particularly relating to home office furniture and refurbishment)
  • Continuing professional development training costs (not including training costs for new skills)
  • Insurance (usually a contractual requirement for limited company contractors operating outside of IR35)
  • Cost of goods sold on to clients
  • Computer consumables
  • Business entertainment (although this is not allowable for a Corporation Tax deduction)
  • Annual staff events (up to £150 per head within the personal tax year, for every employee plus a guest each)
  • Wages and salaries (normally a minimal salary to use up an individual’s NI free allowance)
  • Pension contributions made to an approved company scheme
  • Books and publications related to the business of the company
  • Use of home as office at a flat rate of £4 per week/£18 per month (unless evidence of the ‘separate metered cost’ of running your business from home can be provided)
  • Relevant Life insurance premiums
  • Childcare (subject to specific conditions)
  • Annual eye tests plus the cost of any lenses required for VDU use only (minimum requirement frames)
  • Safety clothing/equipment required to comply with Health & Safety regulations
  • Equipment or services provided to employees with a disability (inc. hearing aids)
  • Long-service awards (with certain restrictions)
  • Executive income protection
  • Trivial benefits to employees (such as small gifts, seasonal gifts, a Christmas turkey, seasonal flu jabs, tea and coffee, water cooling dispenser)
  • Cycle to work scheme (employers can claim capital allowances and employees can borrow the bicycle as a tax exempt benefit)
  • Commercial vehicle costs (especially if you are caught by the 24 month rule)

What expenses can’t I claim through my limited company?

  • Lunches, teas, coffees, breakfasts etc unless these are genuine business entertainment
  • Gym membership (this will trigger a P11D benefit in kind charge to you and your company)
  • Health Insurance (this will trigger a P11D benefit in kind charge to you and your company)
  • Household bills (eg electricity, gas, water, council tax, rent etc)
  • Broadband (unless it was specifically installed as a requirement of your company’s business)
  • Training costs for new and irrelevant qualifications/skills
  • Travel to and from a permanent place of work
  • Personal grooming and business dress
  • Private school and university fees
  • Weddings
  • Flying lessons
  • Massages
  • Golf club membership fees
  • Professional fees for the preparation of your Personal Tax Return (unless as part of a bundled package)
  • Making yourself redundant