Tips for Limited companies - Claimable expenses : Wages/ Directors Remuneration It is tax efficient to pay yourself, as a director, a salary to utilise your personal allowance. You could also consider paying your partner a salary, only if they work in the business and have some personal allowance available. Naturally staffing costs are an expense to your business, along with the employers national insurance contributions. Pension Contributions Pensions are a good tax planning tool, they help you extract funds from your company and are also an allowable expense for corporation tax, only if you have an employer’s contribution scheme. Telephone, Mobile and Broadband If you use these for your business then you should claim the expense. Ideally the expense should be paid directly by the company , remember if the expense is paid personally and not wholly for the business, then only the business element should be claimed. If you claim the whole amount you would trigger a benefit in kind if there is personal use. Hotels and accommodation If you are travelling around the country/globe visiting clients then the cost of your hotels are an expense to your business. If you are travelling for business and pleasure, the pleasure amount must be incidental to the trip for it to be an allowable expense. If you are working abroad for a long period of time there are circumstances when you can claim the costs of your partner coming out to visit you. Depending on the circumstances you can claim a flat rate (without a receipt) of between £5 and £20 per night, depending on where in the world you have travelled to for work, as incidental expenses to cover food etc. However, with the rising costs of food you might be better off claiming the actual costs rather than the flat rate allowance. Mileage Claim It is normally more tax effective to claim mileage rather than buying a car through the company, mainly due to fuel rate charges and benefit in kind issues. Other travel expenses Train, bus and taxis are all allowable expenses if you use these to visit clients, or for other business trips such as seeing your accountant or bank manager. Car hire and parking changes can be also claimed. If an employee receives a parking ticket whilst working, then this fine can be paid by the company and claimed as a tax deductible expense. Note that parking tickets are only an allowable expense for employees, not a sole trader. Accountancy fees Of course our fees are a tax deductible expense, but only the business element. If your personal tax return is included then a benefit in kind is triggered unless an adjustment is made in your director’s loan account when the annual accounts are prepared. Entertainment NOT ALLOWABLE, but remember that if you are entertaining clients you can claim the expense back but the company cannot claim the tax relief. Don’t forget that the company is allowed to spend £150 per employee, per year, for a festive party. If the cost is more than £150 then the whole amount becomes disallowable. If the party is going to cost more than £150, it is recommended that the directors pay the difference personally so that the £150 is still available as an expense. Training and development The rule here is that you can claim for maintaining/enhancing your skills required in the business but not the acquisition of new skills. For example an IT contractor going on a computer course is allowable, but learning to become an aeroplane pilot would not be allowable. Advertising If you are advertising and marketing your business these expenses are allowable. Examples would include yellow pages and Google ad words. Don’t forget to claim any costs involved in social media and networking. Companies House fees Paying your annual filing fee is an allowable expense. Some accountants include this fee in their fixed priced accountancy packages. Bank Charges and loan interest If you are charged bank fees, then these can be claimed, along with the interest charged on borrowings in the company name, including loans and overdraft facilities. Factoring charges are allowable and any bank management fees or arrangement fees can be claimed. Professional Subscriptions If you are a member of a professional body, which relates to the trade, your annual subscription is allowable, along with any continuing professional development to maintain the membership. Reference books and Journals If you need reference books or journals to support your trade or part of your training, then you should pay for and claim these in the company. Eyesight tests This is a tax deductible expense for limited companies. You can claim for the eye test and normally the lenses, but not the frames. Office stationery and postage All your paper clips, pens and paper can be claimed, not forgetting the huge cost of postage. Luckily emails are free! Couriers can be claimed, along with other sundry office costs such as cleaning, loo roll and tea and coffee supplies. Computer Equipment As computers rarely last more than 2 years, any PC’s, laptops and ipads used for business can be claimed. Currently you can use your annual investment allowance to claim the whole expense in the year of purchase. Computer software, depending on its life span, can be either claimed as an expense or capitalised and included in the annual investment allowance claim. However, as software is normally upgraded yearly these items can normally be expensed. Use of home as an office If you maintain an office/storage facility at home, then HMRC allows you to claim £3 per week without any proof of expenses. Alternatively you can calculate a percentage and time in use, this proportion of the total household expenses can be claimed. For example if you use a spare room and you have a 3 bedroom house plus a lounge and kitchen, you can claim 20% of your household bills to include, mortgage interest, buildings insurance, gas, electricity, council tax and any other expense incurred in running your home. However when claiming use of home as an office, if this proportion of the home is permanently used as an office then it is not eligible for principle private residence relief and subject to capital gains tax if you sell your property and make a gain. Office furniture and any machinery Your office chair, desk and cupboards can be expensed in the same way as computer equipment, the same is true of any machinery used in the production of goods. Legal and professional fees If you require the help of a solicitor and if their service is related to the trade of the business then the expense is allowable. If it relates to capital items, then the costs need to be capitalised along with the capital expenditure. If you are paying for legal work to raise capital or drawing up shareholder agreements, then these costs are also disallowable. Professional fees such as business coaches/consultants etc are also allowable. Repairs and renewals General maintenance of your property is allowable, such as light bulbs, fixing broken equipment etc. However improvements/renovations should be capitalised and added to the base cost of the property. Leasing of equipment Lease or buy is sometimes a difficult decision, leasing is an allowable expense for corporation tax and is very useful for cash flow. If you have used your annual investment allowance for the year it will take you some years to benefit from the capital investment of new equipment, thereby leasing an asset gives you tax relief sooner. Insurances All of you insurance products are allowable expenses, such as professional indemnity and public liability insurance. You can also claim key man insurance and certain types of life insurances. The general rule is if the pay out of a claim is taxable then then premium will be tax deductible. Business gifts Food and drink are not allowable, however a gift of under £50, with your corporate branding on, can be claimed. A nice corporate umbrella or pen will be fine. Company Formation fees The initial cost of forming a company can be paid by the business, or reimbursed to the director, but this expense is not allowable for corporation tax.
Posted on: Tue, 09 Jul 2013 09:06:33 +0000
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