HMRC has general guidance on what expenses you can claim with a limited company. This means anything that is “essential” for your trade will fall under the description. Anything your company purchases for its trade, should allow it to generate more profit, for example, any software your company requires to use or advertise its services can be claimed for full tax corporation tax relief. If you want to claim more, then you will need to create a calculation to apportion your electricity, water and gas bills. For business use. Do not include things such as Council Tax these are fixed costs that would be incurred with our without a limited company.
What are typical company expenses?
Limited company expenses can vary, from travel cost to business insurance, in principle, your company can deduct from turnover any type of expenses which aren’t specifically disallowed by HMRC, or capital expenditures.
- Staff entertaining- In order for your company to receive full corporation tax relief on staff entertaining costs, (events, group exercises etc.), all staff members must be invited to attend. Keep in mind that if your company spends more than the £150 allowance, the entire expense will no longer be allowable for tax relief.
- Travel & Subsistence – Travel between your company’s registered office address and client sites. You can easily claim the mileage allowance from your company which is £0.45 per mile for the first 10,000 miles and £0.25 thereafter, also keep records of your business travel with a mileage log and any relevant receipts. You can also claim food while traveling for business.
- Equipment – Any equipment your company needs in order to provide its service will be allowable. This can be certain hardware, tools and accessories for your computer. Often time’s contractors or freelancers will source materials or equipment on behalf of clients.
- Staff Training- Your Company is able to pay for any necessary staff training to further improve its own services. However this is limited to the services your company already provides.
- Uniforms & Protective Clothing – Essential protective gear related to your company’s trade is absolutely fine as a business expense. It you brand your uniforms this is also allowable.
- Internet & Phone – Your Company is able to provide one mobile per employee. This would need to be a business contract because employees could easily use a personal contract for personal time. You can also claim internet costs if being used for business.
- Software & Web Hosting – Any software your company requires to carry out its trade or even advertise its services can be claimed for Full Corporation. The same goes for web hosting. Having a website is a form of advertising.
- Advertising & PR – This falls under the general category of an expense which will further the company’s turnover and profit.
- Medical Costs – These are only allowable when they can be directly correlated to your company’s service
- Any kind of labour cost related to your company’s services is again perfectly acceptable as a business expense
- Company Pension Contributions – Your Company can contribute into a personal pension scheme on your or your employee’s behalf. There’s a limit of £40,000 per tax year, but it’s fully allowable for corporation tax relief.
- Fixed Assets – These are equipment, plant and machinery purchases that have a “life” of 2 years or more. So a laptop worth £2000 could fall into this category.
What are Dis-allowable company expenses?
Some things might not be as obvious as a dis allowable expense for your limited company. In most scenario’s these include items that have a “dual purpose” or a personal element to them. HMRC cannot clearly distinguish that it is essential for your company.
- Groceries – Although HMRC allow you to claim subsistence costs from the company, they will not be happy about you’re claiming groceries from it.
- Gifts containing food or Alcohol – HMRC does not allow your company to claim tax relief on any gifts containing food or alcohol.
- Personal Costs – Making any personal purchases through your company will create a benefit in kind, for example a gym membership is a personal cost and you will need to pay extra personal tax on the benefit received.
- Clothing – Clothing has a very strong “dual purpose” element to it unless it is branded with your company’s logo. Normal business wear can just as easily be used for social gatherings.
- Client/Business Entertaining – Unfortunately client or business entertaining cost cannot receive corporation tax relief. You can only reclaim if this was paid personally.
- Dual Purpose Items – Again these will simply create a benefit in kind as its very difficult to prove these being “wholly and exclusively” for the purpose of your business.
This is a detailed list of what expenses you can claim with a limited company. If you’re not sure of an expense, always get in touch with your accountant or even call HMRC business helpline for more guidance.