This is probably the most popular question asked by many business owners. We all know how important is to keep the costs of your business down, so if you just started your company or have been running a business for a while but need quick refresher, this guide will walk you through the do's and don'ts of expenses.
Conducting your business through a limited company gives a great deal of flexibility and allows to offset many of the costs, including travel, employee cost and equipment. This is great since expenses are deducted from earnings, which reduces corporation tax bill and leaves more funds in your company. Reclaiming is quite easy, but you have to make sure that cost is allowable, relevant to your business and you need to keep copy of the proof of spending (e.g. invoice, receipt, etc.) for 6 years.
Below is the list of the most common costs that your business can claim. Although you can keep a paper copy of receipt, in this digital age, electronic copy is a new wide spreading standard, so don't forget to take that photo.
- Advertising, publicity, marketing
- Brochures, business cards and flyers
The expenses related to employing staff and their welfare:
- Pension contributions (via an approved scheme).
- Employers' national insurance contributions (NICs) payable on salaries paid to company employees.
- An eye test for employees who use computer equipment.
- An annual private health check for employees.
Accommodation and travel
- The cost of subsistence while away from your workplace (no claims after 24 months for subsistence the same 'temporary workplace').
- Accommodation costs when away from normal place of business (although must not exceed 24 months at a 'temporary workplace').
- Travel and parking costs are allowable. When you are using your own vehicle for performing the work duties, you can claim mileage allowance of 45p per mile for the first 10,000 miles, and 25p per mile thereafter. If you are using bicycle instead of vehicle you can claim 20p per mile rate. The mileage log is advisable to be kept.
- Incidental overnight expenses of £5 per night (or £10 per night if overseas) can be claimed as a flat rate if you are working away from home.
- Company car expenses (benefit in kind will be charge for any private use).
- Telephone and broadband packages can be claimed if the contract is in the company name, otherwise only business proportion of costs is allowed.
- Mobile and Smartphones can be claimed following the same rule as above.
- The cost of business calls can be reclaimed on a residential phone bill.
Stationery and office cost
- Stationery, postage, and printing costs.
- Business magazines and books.
- Business insurance, such a professional indemnity insurance or employer's liability insurance
- Home office costs (a flat £4 per week without receipts is allowed by HMRC, or work out a proportion of the household bills).
Gifts and entertainment
- Business gifts up to £50 per individual are allowable before more complex rules apply.
- Cost of an annual company event, such as a Christmas party is allowed up to a cost of £150 for you and for your partner.
- Costs of entertaining clients may be reclaimed, but it cannot be offset against the company's Corporation Tax bill
Software and equipment
- Equipment costs, such as PCs, laptops, tablets etc.
- Software costs
- Capital allowances (depreciation of assets).
- Hire purchase agreements (in the company name).
Admin and professional fees
- Accountants fees including bookkeeping fees
- Training course fees if directly relevant to the business.
- Business bank account charges and interests.
- A limited number of professional subscriptions, it has to be allowed by HMRC.
- Website hosting
- Other professional fees, such as hiring a solicitor to act on behalf of the company.
It is important to remember, that any costs claimed have to be 'wholly, exclusively and necessarily' for your business. If any of the expenses have both personal and business use, they cannot be claimed. There may also be specific expenses related to your business, so if in doubt please just ask a question.