Helping you understand what you can and can’t claim for whilst contracting.
Expenses are pretty much the point of contracting via a limited company!
The merits of the different methods of contracting were discussed in our Guide to contracting and we established that for longer contracts (more than a few months) contracting via your own company was best. It is best simply because there are many more legitimate expenses that you can claim, thereby reducing your exposure to tax and increasing your take-home pay.
With expenses being so important it’s best you know the different types of expenses that you may be able to claim
Advertising – There may be a time between contracts where you need to advertise for work. Any costs associated with this are fully allowable.
Clothing – Clothing that is a uniform or protective in nature can be claimed. Protective clothing is often obvious such as steel toe capped boots and safety gloves. Uniform must carry a permanent logo or corporate embroidery to be allowable.
Hotels – If you need to stay away from home for business purposes then you can claim the cost of a hotel or B&B, just retain the invoice.
Meals – Meals that are eaten whilst away from your normal place of work when away for business purposes can be claimed for. Ensure receipts are kept.
Mileage – This is often the largest expense of most Guides. Any travel you do for business purposes should be recorded and claimed. The rate is 45p (different rates for motorbikes and bicycles) per mile for the first 10,000 miles and 25p thereafter.
Please note business mileage is not home to a regular place of work. Your regular place of work could in some circumstances be your home.
Mobile Phones – If you pay for your mobile phone yourself and use it for business then you can claim the cost of itemised calls. A better option is to have your phone through your company and claim the cost in full regardless of the split of business and personal calls
Parking – Any car parking you require for business purposes is allowable. Receipts should be kept where possible but small amounts from parking machines can be claimed without proof. Please note parking fines do not apply.
Other Travel – There may be times when you need to use public transport or taxis as part of business trips. If that is the case just ensure you obtain a receipt and the cost is fully claimable.
Stationery and postage – It’s likely you may incur some costs relating to stationery, postage and printing in relation to your business. Again ensure you retain any receipts.
Trade subscriptions and professional fees – Many industries have a trade subscription or related professional fees. As long as they are one of the HMRC approved bodies then these are fully allowable.
Training – You may need to undertake training courses to continue to remain up to date. As long as this is in relation to your line of work then it is fully allowable..
Working from Home – Without proof of costs, you can claim a simple flat rate for working from home. The flat rate is based on the number of hours. 25-50 hours is £10, 51-100 hours is £18 and 101+ hours is £26. In most cases, this won’t cover the costs involved. For these cases, we have a template you can use in order to calculate your costs and how much you can claim.
There may be other expenses that you incur inline with your business. As long as these expenses are ‘wholly, necessarily and exclusively’ for your business then they should be acceptable. Remember proof may well be required by HMRC so you need to keep all invoices and receipts where possible.
If you are ever in doubt then always seek advice beforehand. It’s much easier to do your research or ask for help before than fix potential problems later.