Which limited company expenses can I claim?

Limited companies are run slightly differently to non-incorporated organisations, so here's a here’s a (hopefully) simple guide to the expenses that you can claim.

Let’s start with the basics, and look at what expenses you can claim BEFORE you actually start trading.

A business cannot begin to trade unless it’s in the position to actually provide services/goods to it’s customers, so you’ll need to buy stock/software/pay rent for premises etc. You get the idea. And the good news, is that you can claim these within your first years’ accounts, as long as:

1. They would have been tax-deductible if you’d purchased them on your first day of trading.

2. You incurred the expense within seven years of commencement of trading.
   

But what about if they were a capital cost?

If they were a capital cost, and you’re using the cash basis to complete your accounts, then they may be claimed as a business expense. But, if you’re using the accrual basis, then you may claim capital allowances.

Now that we have pre-trade out of the way, let’s look at your run-of-the-mill/common or garden/day to day (can you think of any other phrases???) expenses, because some expenses are simply not allowable.

You may claim the following in full, or adjust for personal use:

• Wages and salaries

  • The cost of employing staff is an allowable expense.

• Cost of sales

  • Purchase of items to carry out your business are all allowable.

• Staff entertaining - this must meet 3 criteria points.

  • It must be an annual event such as a summer BBQ

  • It's open to all employees

  • The cost is less than £150 per guest

• Office costs

  • Rent, light and heat are all allowable.

• Hotel accommodation

  • If staff or directors are working away from home.

• IT Services

  • All computer software and business apps such as cloud accounting, secure file storage are allowable.

• Advertising

  • The company can claim any advertising and marketing costs, but not costs such as taking a client out to lunch.

• Bank interest

  • Interest on loans or mortages relating to company property is allowable.

• Work clothing

  • This has to be embroidered and necessary to do the job

• Motor and travel costs

  • Parking and tolls, mileage costs and repairs can all be claimed.

• Telephone expenses

  • The contract should be in the name of the limited company and kept for company use only.

• Professional subscriptions

  • For HMRC approved bodies

• Professional fees

  • Professional fees such as accountancy or legal fees incurred by the business are allowable.

• Medical expenses

  • Items such as a legally required eye test for an employee using a computer is an allowable expense.

• Training courses and related costs

  • This is an allowable cost as long as it relates directly to the trade of the company.

What can’t I claim?

• Depreciation is a biggie. Depreciation of your assets is not an allowable expense, even though it sits there on your profit and loss account. It’s added back to your profit for tax purposes, and the adjustment is made on your tax return.

• Regular commute – Nope, if you’re commuting to a regular place of work, you can’t claim for that. An overnight business trip is fine, or an ad hoc visit to a client, but nothing more. Similarly, you can claim for expenses such as tolls, congestion charges etc, when the journey incurred was for the purposes of business.

• Pension contributions - This is an allowable cost of having staff and running a limited company.

• Medical and health insurance. No, not allowable as an expense, it’s personal.

• Food and drink – This can be confusing to many, but, simply put, you have to satisfy one of three conditions to be able to claim.
  

  • If you’re staying away from home for business – reasonable costs are allowed. A steak salad is fine, but don’t go mad and order Champagne.

  • If you make a journey that is outside of your usual pattern, for example, a training course or ad hoc client visit.

  • Tea, coffee and biscuits are an allowable expense, as long as it's provided to all employees.

• Entertaining clients - You cannot claim any deductions for entertaining clients, there is no tax relief for the cost of entertaining anybody aside from employees.

Of course, there are hundreds of other expenses, we've only touched the surface really, but hopefully this gives you a flavour.

And if you're unsure, pick up the phone.

0161 406 8660

Or use the contact form.