What expenses can I claim via my Limited Company?

A significant advantage of being a limited company contractor is the enhanced ability to claim tax relief on business expenses. Here we provide a detailed list of the business expenses you can claim and how to keep accurate records to maximise your tax efficiency compliantly.

Claiming expenses correctly can help to reduce your profit, which in turn keeps your Corporation Tax down and helps you maximise your take-home pay. However, it’s important to understand what constitutes an allowable business expense to ensure you run your limited company in a tax-efficient way whilst remaining compliant with HMRC’s rules.

The rules on allowable expenses

HMRC’s general guidance states that expenses you claim through your limited company must be ‘wholly and exclusively’ for the business. This is straightforward guidance that should be simple to follow for most large businesses. However, some limited company expenses can present a bit of a challenge – it may be that you work from home and that you use broadband and phone lines for both business and personal use, for example.

If you have any questions on whether or not your expenses are allowable under HMRC’s regulations, don’t hesitate to get in touch with your dedicated Workwell accountant who will be happy to advise you.

So, what can I claim?

Accountancy fees
If you’re working with a contractor accountant, you may be able to claim back the costs associated with setting up your limited company as well as ongoing accountancy costs.

Accommodation costs
You can claim tax relief on the cost of accommodation when you travel to a temporary business-related location, though this cost must be considered ‘reasonable’.

Business mileage
When using a personal vehicle to get to a temporary workplace you can claim mileage at the rates shown in the table below. Your mileage should be recorded on your company accounts as this will help to reduce your overall Corporation Tax bill. If you drive a company car, you can only claim the cost of fuel.

Childcare
Although childcare can’t be claimed as a business expense, there are various government schemes and allowances to make childcare more affordable for working families in England.

Eyesight tests
You can claim for an eyesight test providing you can prove it’s necessary for the use of visual display equipment for your work.

Entertainment
You cannot claim tax relief on business entertainment or gifts. However, you can claim for a Christmas party or staff event for employees. Employees may invite a partner, but the expenditure must not exceed £150 (inc VAT) per person.

Equipment
You can claim tax relief on the cost of equipment you need to perform your work including computers, phones, and furniture (such as desks and chairs). As long as personal need for these items is considered ‘insignificant’, HMRC will not treat it as Benefit in Kind (which has different tax implications).

Food and drink
You can claim for food and drink when out and about on business. HMRC’s rules state that lunch can be claimed if you’re out for 5 hours or more and dinner if you’re out for 10 hours or more. If you have to stay overnight somewhere for work purposes, you can claim for hotel rooms and meals.

Home office
You can claim up to £26 a month for using your home office if you can prove that you spend at least 25 hours per month working from home.

Medical insurance
The cost of medical insurance is slightly different since it would be considered as a Benefit in Kind and therefore subjected to different tax rules. Your company can, however, claim tax relief on medical insurance for an employee working abroad and for an annual check-up.

Phone & broadband
As long as your mobile phone and landline phone contracts are solely between your company and the service provider, you can claim tax relief. It gets a little more complicated if your company pays your personal phone bill, in which case the Benefit in Kind rule becomes applicable. If you use your phone and broadband for both work and personal requirements, you can claim for business phone calls made from your personal phone, providing you can prove that the call was for business purposes.

The cost of home broadband is allowable if you work from home and your broadband contract is between your company and the service provider. We recommend setting up company phone and broadband contracts which operate separately from your personal lines to keep claiming expenses clean and simple.

Salaries and National Insurance
Salaries paid to employees or directors are allowable expenses, as are National Insurance contributions. Again though, these can be challenged if unreasonable – which would normally mean uncommercial.

Subscriptions
You can claim tax relief on membership of HMRC-approved professional bodies as long as they’re relevant to your work. The list of which organisations are approved changes regularly, so check with us for the current list.

Stationary
You can claim for postage, printer ink, paper, and pens.

Training
Training courses that apply to your work are allowable as business expenses.

There is a range of other expenses you may be able to claim such as charitable donations of employee pensions. Your personal accountant will always be on hand to advise you if you have any questions about allowable expenses.

How to record expenses accurately

You must keep accurate records and copies of receipts when claiming business expenses. You should file and retain copies of all receipts of business-related expenses and keep them safely filed with your accounting records for at least six years as HMRC may choose to investigate within this time to ensure you’re claiming accurately and compliantly.

As a limited company contractor with Workwell, you’ll gain access to our cloud-based online accounting software which makes keeping up to date records of invoices and expenses simple. In the meantime, if you have any questions relating to limited company contracting or the expenses you can claim, don’t hesitate to get in touch on 01923 257257.