Expenses: What you can claim as a limited company

   

The issue of what constitutes an expense, and what doesn’t, can be a minefield for any freelancer to negate. The following is a selective list of what expenses you can claim if you’re a freelancer working with limited company status.

Bicycle expenses

Freelancers and contractors who wish to travel the healthier way to work can claim bicycle expenses. In 1999 the ‘Cycle to Work Scheme’ was introduced as part of the sustainable carbon reduction policy. This makes it cheaper for freelancers and contractors to go green!

Broadband Internet

Contractors and freelancers can claim expenses on their Broadband Internet. In order for expenses to fall within the “wholly and necessarily” rules the internet contract must be addressed and invoiced to the company. If the Internet is in a personal name, only the business usage may be apportioned as an expense.

Childcare vouchers

Contractors and freelancers can claim childcare vouchers through a Limited Company under the Government childcare voucher scheme. Through the Childcare Voucher Scheme employees are able to receive up to £55 per week (£243 per month) in childcare vouchers. These are exempt from tax and National Insurance Contributions, and are available to each parent and legal guardian.

Entertainment Expenses

For contractors and freelancers entertainment expenses are usually disallowed. However in some circumstances Input VAT may be reclaimed.

In order to claim entertainment expenses a distinction must be made between personal and business entertainment. Personal entertainment is not deductible. Business entertainment must not be provided to an employee of the business and must have been free of charge to the recipient. This can include food and drink and theatre or concert tickets.

Home-working Expenses

Contractors and freelancers who work from home are entitled to claim home-working expenses. There are several different options through which contractors and freelancers can reimburse home expenditure – and this depends on the structure of their company and the specific nature of their home working arrangements.

Mileage Expenses

Contractors and Freelancers can save tax by claiming tax-free mileage allowance payments for the costs of their business journeys made in their own vehicle, under the Approved Mileage Allowance Payments Scheme.

Subsistence Expenses

Subsistence expenses are business travel expenses such as meals. If subsistence expenses are incurred while traveling on allowable business journeys, employers are able to make subsistence payments tax and NIC free.

Travel Expenses

Freelancers and contractors can claim expenses on travel costs. HMRC states that deduction is allowed for the full cost of travel where necessary attendance is required.

By Darren Fell

18 Comments

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    Great information! I’ve been looking for something like this for a while now. Thanks!

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  • Occupational Therapy

    Great, I never knew this, thanks.

  • MarkSpizer

    great post as usual!

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    great information you write it very clean. I am very lucky to get this tips from you.

  • pharmacy tech

    Great information! I’ve been looking for something like this for a while now. Thanks!

  • Alex Park

    another point to make even though its slightly off topic is the flat rate vat scheme. You can earn a financial advantage from this too when working through your own Limited Company.

  • Karen Cayamanda

    This is very useful information. Knowing how to properly account for expenses can make a great difference in your records and your assessment of your operations.

  • Paul

    I tend to leave this kind of thing to my accountant as there is so much to get to grips with. But one thing I would suggest is to keep a very thorough record of everything that you spend, either by putting receipts into monthly envelopes or using software to track daily expenses.

  • Steve Sims

    As a tax writer, the company expense information you give is a little fluffy and not completely accurate.

    Basically, individual freelancers and companies can claim the same expenses and there is no definitive list from HM Revenue and Customs.

    Anyone can claim any expense providing the cost was incurred ‘wholly and exclusively’ for business. That includes buying software, technology and other consumables for business, travel and subsistence in certain circumstances, books and periodicals, subscriptions, postage, accountancy costs and more depending on your specific business.

    Where an expense is dual purpose – for instance you use a car privately and for business, the expense can be split pro rata for instance £50 for petrol for a car 20% used for business means £10 is a business expense and £40 a private expense.

    We have a special calculator for home office costs that takes account of mortgage interest, home insurance, council tax and utilities etc – these can be claimed as a homeowner or tenant.

    Hope that helps

    Regards

    Steve Sims

  • Amy Rib

    Hi, Good article! Very well written and right to the point. I am referencing some of this information in my own papers as a guide, I hope you don’t mind.

  • Accountants For Contractors

    Thanks for sharing great article. I really appreciate it. Keep it up……..

  • Samantha L.

    The article was perfect. Thanks for sharing!
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  • Constance Floyd

    I never knew this until I have read this article! This is great for people who manages their finances poorly.

  • entertainment

    never knew this until I have read this article! This is great for people who manages their finances poorl

  • Baptiste

    Great article.Indeed a big help.No idea til’ I read this post.! thank you!

  • Sebi accountant

    Thank you David Heaton for your comments above which are most helpful. I have one quick question about the reporting process. A business places people making telemarketing calls.

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