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