What expenses can I claim for a limited company?

Travel and Subsistence Expenses

Generally, you can claim expenses incurred for all legitimate business journeys including travel to a temporary place of work. A temporary workplace is defined where you go to perform a task for a limited period of time or for a temporary purpose. A temporary place of work ceases to be temporary if it is attended for a period longer than 24 months or is likely to last more than 24 months. This means as soon as you become aware that it will last longer than 24 months, it is no longer temporary.

Please note as an employee in a permanent job you cannot claim travel to your place of work. This would be regarded as ordinary commuting.

Examples of allowable Travel and Subsistence Expenses:

Air, train, bus, ferry and taxi fares
Parking, congestion charges and tolls
Meals whilst travelling or at temporary workplace
Hotel accommodation and meals when you need to stay away from home
Incidental expenses when staying away overnight: £5 in UK, £10 abroad
Business mileage when using your own private vehicle – at prescribed HMRC rates

Vehicle

Rate per mile for first 10,000 miles Rate per mile for miles in excess of 10,000

Car or Van

Motorcycle

Bicycle

HMRC Business Mileage Rates (employee’s own private vehicle):

Claiming fuel used in a company vehicle is considerably less!

Business Entertaining

Generally entertaining is not an allowable expense by HMRC. When compiling year-end financial accounts, your accountant will remove entertaining expenses prior to the corporation tax calculation.

Only entertaining expenses that meet all of the following three criteria maybe claimed:

Customers or potential customers are present.
No member of the employee’s or director’s family is present, and
Where the purpose of the event is not social e.g. reciprocal entertaining

The cost of entertaining staff or colleagues in the same organisation is not considered allowable entertaining. e.g. taking a colleague to lunch.

To ensure entertaining is allowable it should be documented with the original receipts.

If you are vat registered you cannot claim vat on business entertaining expenses.

Staff Entertaining, Benefits & Gifts

Employees provided with benefits in kind such as cars, vans, loans (over £10,000) or healthcare are deemed to have received a taxable benefit. These benefits need to be declared to HMRC by submitting annual P11Ds. Employee tax codes are then amended to collect more tax from the employee. Please speak to your accountant if you provide any employees or Directors with these type of benefits.

VAT can be claimed on staff entertaining.

HMRC allows ‘trivial benefits’, generally under £20 each. Examples of these are:

Work place canteen. Tea, coffee and snacks only if they are available to all employees
Small Gifts. E.g. flowers. As long as these are given in recognition of a particular event and is not part of any reward for services
Seasonal gifts e.g. a turkey, bottle of wine or box of chocolates

HMRC allows up to £150 per employee for an annual event such as a summer outing or Christmas party. All employees must be invited to attend. It is only one event so you cannot have, for example, two events at £75 a head. Please note these rules are not the same for a company with just directors.

For staff entertaining that falls outside the above areas, employers may pay tax for employees that falls due on staff entertaining. An employer can apply for a PAYE Settlement Agreement (PSA) to settle tax in these circumstances. Examples when this may be applicable are:

Company department ‘nights out’ e.g. bowling, meals, go-cart racing.
Employee hampers.

Please note – Cash payments must always go through PAYE.

Telephones and Internet

Home Telephones – You can only claim the cost of business calls. You cannot claim the cost of the line rental because you would have paid this anyway. If you want to claim rental you should install a second line in the company’s name which the company must pay.

Mobile Phones – If the account is in the company’s name and the company pays the bill then it is allowable. If the account is a personal one then you can only claim the cost of the business calls.

Internet – This can be claimed if it is in the company’s name and private use is minimal. If the account is personal you may only claim a proportion of the cost that is related to business use.

Professional Subscriptions and Memberships

Claims for subscriptions to professional bodies relevant to your employment are permitted. Check with HMRC to see whether your body is allowable. Subscriptions where the activities are not directly relevant to your employment are specifically disallowed.

Use of Own Home

HMRC recognises many people work from home so a small amount maybe be claimed for minor home use. If you leave home each day to carry out services at a client’s site, HMRC allow you to claim £4 a week or £18 a month. If your claim is greater than £4 a week then this could trigger an investigation by HMRC. Therefore, unless your cost is significantly more than £4 a week, it is probably best not to make a claim.

If your costs are significant, you must actually work at home on revenue generating activities. The office you use must actually be a dedicated office. It must be available for inspection by HMRC who may want to hold a meeting in it. The cost should represent the cost of providing an office at home i.e. a proportion of heating, lighting, council tax and other direct property costs. For example, for a 10 room house, you could charge 1/10 of your costs.

You should also reduce the cost by the amount of private time spent in the office. A safe formula is to multiply the cost by the fraction of daily hours spent in the office e.g. 8/24. This will avoid your office being subject to Capital Gains Tax should you sell your house.

General Office Purchases

The cost of postage, stationery and computer consumables are all allowable.

Training

You can claim the cost of training courses as long as they are relevant to your employment.

Equipment Purchases

The cost of equipment purchased to carry out the duties of your employment are allowable.

Reference Books and Journals

These are allowable as long as they relate to the duties of your employment.

Eyesight Tests

The cost of an initial eyesight test, if it is necessary for the initial or continued use of visual display equipment in your duties, is allowable. The cost of spectacles is not an allowable cost.

Dis-allowable Expenses

Include:

Office clothing, such as business suits (except safety clothing)
Spectacles
Own car servicing and repairs
Training course not relating to your employment e.g. electrician claiming flying lessons
Private club memberships e.g. gym or golf club
Items mainly for personal use e.g. tv, hi-fi, sat-nav

Please contact your accountant if you are unsure about any other costs.