There are a multitude of expenses that Professional Contractors and Freelancers can incur in their course of business duty, and determining which are allowable and may be claimed against profits can be confusing.
For every £100 of expenses claimed against profit, a tax saving of £21 (2009/10) is being made by the company.
A business expense is any expenditure that is claimable through the business as long as it is a "wholly, exclusively and necessary" expense that was incurred by the business for its performance of day to day duties and there is no duality of purpose for mixed business and personal usage.
Below is a table listing expenses with added guidance and a link for added information where applicable.
We will continue to add to these. This list is intended for Professional Contractors and Freelancers who are employee and director.
| Expense |
Conditions of claim |
Further reading |
| Accountancy |
All fees including advice pre company incorporation |
Further Reading |
| Accommodation |
Hotel, B&B, meals included |
Further reading |
| Advertising |
Allowable |
|
| Air fares |
Exception of 1st class as it is an unnecessary cost |
|
| Annual company fee |
Allowable un-receipted |
|
| Bad debts |
Once the debt is 6 or more months unpaid, VAT needs adding back to output tax if not cash accounting or flat rate scheme |
|
| Bank charges |
Allowable un-receipted |
|
| Bicycles and related costs |
Allowable |
Further reading |
| Broadband internet |
Allowable but conditions have to be met |
Further reading |
| Business (corporate) gifts |
Maximum of £50 in a 12 month period and can be verified for advertising purposes. Food, alcohol and tobacco do not qualify |
Further Reading |
| Business start-up |
Incorporation fees, VAT, PAYE and CT registration fees, accountancy advice, lawyers advice/contracts drawn up |
|
| Capital allowances |
Depreciation on assets |
|
| Car hire |
Proportionate if there is an element of personal use |
|
| Childcare vouchers |
Allowable |
Further reading |
| Christmas gifts |
Need 2 or more employees other than just Director to qualify, gift over £50 is a P11d expense and alcohol, food and tobacco do not qualify |
|
| Charitable donations |
Claimable as long as it does not put the company in a loss making position |
|
| Clothing |
Where it can be classified as a uniform and not used for personal use |
|
| Computer equipment |
Under the net value of £500 otherwise will need to be written onto the balance sheet as an asset |
|
| Company formation fee |
Allowable |
|
| Conference expenses |
Allowable |
|
| Depreciation |
On assets above £500 net value, either straight line or reducing balance |
|
| Director's salary |
Allowable |
Further reading |
| Dues to professional bodies |
Have to be approved on HMRC list |
Further reading |
| Entertainment |
Conditions apply |
Further reading |
| Eye test |
When you are required to work with a VDU to perform the company duties |
Further reading |
| Foreign exchange costs |
Costs of converting foreign invoiced revenue back to sterling for UK companies |
|
| Health check |
BUPA and other annual screening check for director or employees |
|
| Hire and rental charges |
Allowable |
|
| Hire purchase |
Agreement must be in company name |
|
| Home working expenses |
Conditions apply |
Further reading |
| Insurance |
Office contents, Employers liability, Executive income protection, Key man life, Jury service, Motor, Tax investigation, Permanent & private health, Professional indemnity, Public liability |
|
| Interest on business loans |
Loan in the company name |
|
| Key man life insurance |
Allowable |
|
| Leasing rental |
Must be in company name |
|
| Legal costs |
Breaches of law and penalty payments are not allowable |
|
| Magazines and Books |
Generally no VAT to reclaim |
Further reading |
| Marketing costs |
Allowable |
|
| Medical insurance |
Foreign contracts only otherwise a P11s expense |
|
| Medical treatment |
Only when on business abroad otherwise a duality of purpose exists |
|
| Mileage |
Under approved mileage allowance (AMAPs) |
Further reading |
| Mobile telephones |
Conditions apply |
Further reading |
| Motor vehicles |
Company owned, costs with the exception of improvement are allowable |
|
| National insurance contributions |
Allowable, not class 1a |
|
| Office rental |
Allowable |
|
| Parking |
Allowable, £5 daily for un-receipted |
|
| Patent costs |
Allowable |
|
| Pensions provided to employees |
Allowable but advisable to seek professional advice from an independent advisor |
|
| Postage |
No VAT reclaimable |
|
| Professional fees |
Allowable as long as not a breach of the law |
|
| Printing |
Allowable |
|
| Property rental |
Apportion where private element |
|
| Repairs to equipment |
Allowable |
|
| Salaries and wages |
Allowable |
|
| Software |
Allowable, unlike a capital expense, if the value exceeds £500 net, it is still accounted for in the profit and loss account. |
|
| Sponsorship |
Allowable when given freely (not expecting anything in return) no VAT needs to be charged. |
|
| Stationery |
Allowable |
|
| Subsistence |
Allowable with exception of the 24 month rule |
Further reading |
| Taxi fares |
'Adequate' fares are allowable, a limousine is non-allowable |
|
| Telephone |
Proportional if not in the business name |
|
| Training courses |
Must be relevant to the nature of the business |
|
| Training manuals or books |
Allowable when specific to business |
|
| Travel |
Where approved schemes are applied, no benefit in kind charge |
Further reading |
| Use of home as office |
£3 weekly HMRC approved |
|
HMRC have an extensive list of
expenses that explains the treatment of the expense where a benefit in kind charge may exist.