Allowable business expenses reduce the amount of corporation tax your company has to pay on its profits e.g. if you incur an expense of £100, at the current rate of corporation tax of 20%, your company’s corporation tax decreases by £20 (£100 x 20%).
It is important to understand what business expenses you are legitimately allowed to claim.
Whether an expense can be claimed or not depends on whether the expenses meets HMRC’s criteria for a claimable expense.
Important points to remember:
- All expenses must always be actually incurred and must not be estimated or rounded.
- You should keep a record of all your receipts as HMRC can, at any time, request to see proof of these expenses for up to 6 years.
- If IR35 does not apply to your contract, generally speaking, expenses genuinely incurred ‘wholly & exclusively’ for business purposes will be allowable. If any expenses have a ‘dual purpose’ (i.e. non business or private purpose) then they will generally not be allowable. There are, however, examples where the non-business purpose is merely incidental and the expense will still be allowable.
A few of the most common allowable business expenses are:
- Business travel
- Mobile phone
- Employer’s national insurance contributions
- Employer pension contributions
- Accommodation – whilst away from home on business
- Subsistence – whilst working away from home
- Accountancy fee
- Postage and stationery
- Use of home as an office
- Business computer equipment and software
- Internet subscription
- Technical journals and publications
- Business entertaining
- Professional subscriptions to approved bodies
- Bank charges
- VDU Eye tests/eye wear
- Work related training
- Relocation expenses
- Legal and Professional fees
- Business Insurance
For a comprehensive guide on business expenses our clients can access this from our industry leading First Freelance Contractor Cloud.JOIN NOW