Here is the first of my many informative blogs, it is always useful to be more tax efficient and especially in the current economic climate it’s important save costs and therefore tax where possible.
So what is an business expense (Limited Company point of view)?
Allowable expenses will reduce your taxable profits and in turn reduce your corporation tax liability. To be an allowable business expense , the purchase must meet HMRC’s “Wholly and exclusively” rule and it cannot be used in any personal capacity. If the purchase is used by you personally, then it’s not an allowable expense and you and your business will need to pay tax. You’ll need to complete a P11D expenses form for HMRC to ensure the correct amount of personal tax is paid. Your business will pay Employer’s National Insurance on the amount as well.
What can I claim as a business expense?
Generally, any money spent on entertaining clients is not allowable even if it’s a genuine business expense.
- Accounting and Legal Fees
- Accommodation- incurred on a business trip
- Advertising and Marketing
- Annual Staff Events- eg. Christmas party as long as the cost per staff is not more than £150 incl VAT
- Bad Debts
- Business Insurance
- Business Mileage
- Charity Donations and sponsorships
- Clothing- protective equipment
- Computer/Internet Software
- Depreciation of Assets
- Employers National Insurance
- Equipment Expenses- are referred to as capital allowances because capital assets are things you will keep and use in the business, like plant, machinery and vehicles. Under Annual Investment Allowance (AIA) , businesses can spend up to £1 million a year in new capital assets and then deduct those costs from their overall taxable profits.
- Food & Drink- not client entertainment but staff-related
- Interest on business loans- not capital element
- Office costs- Rent, utilities. Home office proportion can be claimed
- Pension Contributions
- Phone costs
- Professional memberships and subscriptions- as long as they are on the HMRC prescribed list. Also, cost of subscribing to trade magazines can be deducted
- Salaries and Wages
- Training Courses
- Travel expenses- only business travel. Toll fees, traffic congestion and parking expenses can be deducted.
Its important to have a record of all your Limited Company Expenses, so make sure you keep all of your receipts and invoices.
Keep in mind that you need to keep records for at least six years after you’ve filed your tax return.
I know this seems like a lot of information to take in but here at Cloud Accounts Services Limited we can help you with your expenses and help you be tax efficient.
Please get in touch if you have any questions on allowable expenses or any other accounting related matters, we are happy to help.
Until next time……