Every limited company director has experienced the moment of uncertainty regarding whether they can claim for something they intend to buy or not.
Its important to know what you can claim to avoid paying more tax than you need to, and to make sure you don’t buy things through the company that aren’t allowable business expenses.
As with all expenses the key rule is “Wholly, Exclusively and Necessary” but as always there are lots of different rules surrounding expenses, which can affect both the company tax and personal tax.
Accounting Fees
You can claim the full cost of accounting services that are incurred by your limited company. If the limited company pay for personal tax affairs, then this will be taxable as a benefit in kind.
Accommodation
If travelling to a temporary workplace or travelling for business reasons you can claim for the cost of your accommodation. The amount claimed must be reasonable and not excessive.
While claiming for accommodation you can also claim for meals on overnight business trips. You must keep receipts to prove the amounts spent, and the amounts must be reasonable.
Advertising
You can claim full tax relief on marketing and advertising like facebook ads, business cards and trade websites.
Broadband
If you work from home using your home internet, you cannot make a claim if the broadband was already in place, unless you can clearly split the business from the personal element. Having two broadband lines could show one line is 100% for business.
If you have no broadband contract at home prior to working from home and install this to be able to work from home these costs can be reclaimed from your company without any benefit in kind charges.
Car and Van Expenses
If the company owns the vehicle there are a number of things you can claim for:
- Vehicle insurance
- Repairs and servicing
- Hire Charges
- Breakdown Cover
- Fuel
- Parking
- Vehicle Tax
You cannot claim for any fines or tickets incurred.
Charitable Donations
The following are allowance gifts to charity:
- money
- equipment or trading stock (items your company makes or sells)
- land, property or shares in another company (shares in your own company don’t qualify)
- employees (on secondment)
- sponsorship payments
Client Entertainment
There is no tax relief for client entertainment unfortunately! This includes gifts.
Clothing
The company can provide you with protective clothing that’s required for you to do your job, such as a highvis jacket. They can also provide a uniform that can only be worn at work to do your job, including a t-shirt with the company logo on it.
The company can give these clothes to you outright or make them available to you, and although the company has to report these to HMRC on form P11D there’s no extra tax for you or for the company to pay. If the company provides you with other clothing, this may be a taxable benefit.
Normally, claiming for any clothing that could be part of an everyday wardrobe is not allowable – so if you have to wear a suit for work but it could be worn outside of work then you cannot claim for the cost
Eye Tests
You can claim for eye tests provided its necessary for the use of visual display equipment in your duties, eg using computers or till screens.
You can only claim for glasses if these are specifically prescribed for screen work.
Mileage – Private Vehicle
When you use your personal car or van to get to a temporary place of work and pay for the petrol personally then you are entitled to reclaim this from the company.
If you use your personal vehicle for business travel to a temporary work location you can claim the HMRC standard rates.
Mileage – Company Vehicle
If the company owns the vehicle you are driving then the company can claim for the cost of the fuel. We would also recommend keeping a mileage log to prove the fuel claimed is for business miles. You also need to think about company car rules if the business owns the vehicle.
Pension payments through your limited company
Once your company has set up a contract with a pension provider it can make payments into your pension and receive 100% tax relief as an allowable business expense. We’d always suggest seeking advice from an IFA regarding pensions.
Professional Subscriptions
If you have a subscription to a professional body that is directly related to your trade then this will be allowable
Office Equipment
Printers, computers, chairs, desks, shelves etc are all claimable if they are bought for business purposes. They will need to be used in the majority by the business to avoid any BIK taxes.
This also covers stationary, trade tools, and postage.
Staff Entertainment
Your company can host employee events as a tax-free benefit providing the following conditions are met. This allowance can be used as one event e.g. a Christmas party, or across multiple events like a Christmas and summer party.
Your employees may invite a plus one, but you must not exceed an expenditure of £150 per head (including VAT). The event must cater mostly for staff. For example, expenses for one director and a plus one would be acceptable and would give you a budget of £300.
However, if those attending are not mostly employees then it would be difficult to argue the event’s main purpose is to entertain staff.
Telephone
If you have separate landline phone contacts for personal and business use this makes it clear there is no personal benefit and the full cost of the business line is allowable. If your company pays your entire personal phone bill, then benefit in kind tax rules come into play.
For mobile phones, provided the contract is between the company and the mobile phone provider, the company can claim all costs as an allowable expense. The company can provide each employee with a mobile phone.
If you make business calls on your personal mobile or landline phone, this is an allowable expense. You can also reclaim the VAT element of the business calls, if applicable, but you won’t be able to reclaim any part of the line rental, as you would incur this cost anyway.
It is very difficult to separate the cost of business and personal calls as most providers now offer packages instead of charging for individual calls. If you can’t separate the business element of your personal mobile phone usage, you cannot make a claim, due to the duality of purpose rules, as any business calls you make incur no extra cost on top of the tariff you already pay for personal calls.
Travel Expenses
If you are travelling for business reasons and the travel is not ordinary commuting, you can claim the costs. This means if you must attend a client’s office and are responsible for paying for the travel or you are visit a training course you can claim the cost of the travel as a business expense. You cannot claim for travel between your home and permanent workplace.
Trivial Benefits
You don’t have to pay tax on a gift or benefit for directors or employees if all of the following apply:
- it cost you £50 or less to provide
- it isn’t cash or a cash voucher
- it isn’t a reward for their work or performance
- it isn’t in the terms of their contract
- directors limit is £300 per year
Training expenses
You can claim for training that is related to your field and that is improving existing skills and knowledge.
Use of Home
You can claim £312 a year as a director of a limited company for use of your home without providing receipts for HMRC. You must be able to prove you do use your home for business purposes.
