Tax law provides that any expense claimed by a business should be a ‘wholly, and exclusively for business purposes, but how do you know where to draw the line. That morning coffee at the train station may be business critical to get you up and going in the morning, but how do HMRC see it?
Here are a few guidelines to stick to which are particularly relevant to owner managed businesses such as IT Contractors.
IT & connectivity
You can claim for the following if you can show they are for business use only:
- Computer hardware
- Computer Software
- Mobile phone contract (but only if it is in the name of the business)
- Mobile phone purchased outright
- iPad or other tablet device
Training and professional body membership fees
So long as the following apply directly to your business, you can claim for:
- Literature necessary for training or courses
- Essential body member fees
- Fees for non-essential body memberships listed here: https://www.hmrc.gov.uk/list3/list3.pdf
- Journals/magazines wholly for business with no private benefit
Food, Drink and Entertainment
- Meal costs whilst working remotely or staying away overnight
- Breakfast if leaving before 6am
- A meal if working for 5 hours or more
- 2 meals if working more than 10 hours
- an evening meal if working after 8pm
- You can also claim for reasonable entertainment expenses (but the business itself cannot claim tax relief).
- Businesses can choose to pay round sum allowances of £5 for meals (and £15 for an evening meal) without receipts for employees (but not directors).
Accommodation & Travel
So long as your time away from home is related to a specific assignment, you can claim for the following:
- Costs of a hotel or B&B
- £5/night (£10 if overseas) for necessary expenses, such as toiletries
- A rental property which is not your usual place of residence, for example, if you have to rent closer to work Mon-Fri but return home at the weekend
- Air travel, train, bus or taxi, even road tolls and congestion charges
- Car hire when the use of the car is exclusively for business purposes
- Mileage at a rate of 45p per mile for the first 10,000 business miles, reducing to 25p per mile after that (where an employee uses his own car).
- 25p per mile for each mile you travel on a motor bike and 20p for a bicycle for business
- You can claim clothing only if it is a uniform or protective clothing (so not suits).
- Home office furniture, so long as most of your work occurs at this location
- A weekly allowance of £4 where a business requires an employee to work from home on a regular basis
- Accountancy fees
- Pension payments to your employee’s pension.
And don’t forget to keep all of your receipts!
Finally a word of warning, new legislation surrounding traveling expenses will affect contractors if their assignment falls under IR35, so it’s important to check on this ahead of accepting a contract. If you’re unsure on this point, call our team to discuss your next contract.
If you think you might not be claiming all of the expenses you could be, why not get in touch with our team for a no-obligation consultation to see what our personally tailored service could do for your business bank account.