Depending on how you choose to operate as a contractor, there are various expenses that you may be entitled to claim for.
It can be a challenge to keep track of all your outgoings, but it is worth knowing what expenses you are entitled to claim back and how you go about it.
HM Revenue and Customs have rules in place that only allow individuals to claim for legitimate business expenses. The rules state that expenses can be claimed for ‘providing they are wholly and exclusively for the purposes of your business’.
It is important that you keep an accurate record of all your expenses in case you ever need to provide evidence to HMRC. The records will normally have to be kept for 6 years after the financial year end, unless you submit your tax return late, as the time limit may then be extended.
A list of some allowable expenses
Tax relief can be claimed on accountancy fees as long as the accountant is working on company accounts, and not personal accounts.
Tax relief can be claimed on accommodation that is used on business travel, as long as the expense is reasonable.
You can receive tax relief on donations made to a registered charity.
Limited companies are entitled to host a Christmas party tax free. The price per head must not exceed £150, and everyone in the company needs to be invited.
Company formation fees can be claimed back once your business is up and running.
Tax relief can be claimed on any equipment that is bought for business purposes. It must be equipment that is essential for the running of the business.
You can claim mileage allowance if you use your personal vehicle for business. The rate you can claim depends on the type of vehicle and the amount of miles you travel.
Companies can receive 100% tax relief on pension contributions and there is no limit to the amount you put through the company.
A salary paid to you is an allowable expense.
Expenses may be claimed on phone calls made for business purposes. If a phone is used for both business and personal, then you cannot claim line rental.
Travel and subsistence:
Travelling to a workplace is considered an allowable expense. This is only allowable if it is a temporary workplace for less than 24 months.
This list is not exhaustive so if you are ever in any doubt over what you can and can’t claim for through your limited company, you should ask for advice from your accountant.