If you’re a contractor working through your own limited company and are outside IR35 things are pretty simple. HM Revenue and Customs states that expenses can be claimed provided they are wholly and exclusively for the purpose of your business. To help you out we’ve compiled a (not exhaustive) list of the most common expenses that can be reclaimed for business purposes
List of expenses
Business traveling (obeying the two year rule)
Business telephone calls
Salaries paid by the Company to the Contractor and Contractor’s spouse for work done
Employers NI Contributions
Contributions to an Executive pension plan
Either a mileage allowance or the costs of running a car (if car owned by Company, a benefit in kind charge arises on the Contractor)
Technical books and journals Subscriptions (in most cases)
Use of home office
Company bank charges and interest
Christmas Party allowance – limited to a maximum of £150 per employee
Do I need to keep my receipts?
Although your accountant does not need to see your receipts, Speedy advises that you hold onto any that you make claims for as an expense. We also advise that you keep your receipts for a minimum of six years as the Revenue, if they do decide to investigate they can go back as far as six years.
Expense or Not??
Perhaps the most commonly asked question – what is and what isn’t a valid business expense.
You can claim actual meal costs whilst you are working at a remote site, away from your normal place of work, or when staying away from home overnight, but daily, round sum claims for meals are not permitted.
You can claim the cost of travel to and from your temporary place of work. Mileage rates are 45p per mile for the first 10,000 miles in any fiscal year and then 25p per mile thereafter. This allowance is to cover fuel and running costs of the vehicle.
If you are travelling to work as a passenger in a car you are entitled to claim 5p per mile. You can also claim for parking and the congestion charges but you may not claim for parking fines or speeding fines. The cost of travel by public transport can be claimed but you must have a valid receipt. A mileage allowance can also be claimed for travel by motorcycle and bicycle at rates of 24p per mile and 20p per mile respectively.
The cost of hotel or bed and breakfast accommodation can be claimed as an expense, as can the reasonable cost of additional meals taken in conjunction with overnight accommodation. There are no set allowances for accommodation but the cost must be deemed to be ‘reasonable’; this also applies to the cost of meals.
You cannot claim for ordinary clothing which would form part of an ‘every day’ wardrobe even if you would not be likely to wear your working clothes anywhere other than at work.
Providing the training course is wholly and totally relevant to the performance of your duties under your existing contract.
What if you’re IR35 – what expenses can be claimed
If your contract is caught by IR35 then the only expenses claimable are:
administration expenses which are fixed at 5% of your contract income, travel and accommodation expenses, pension contributions and certain professional subscriptions. You should, however, still record and receipt all business expenses.
What do the Revenue say?
In relation to expenses, if you are outside IR35, the revenue quote that you can claim back anything that is “wholly and exclusively necessary” to carry out the day to day running of your business.
If you feel so inclined you can check out the HM Revenue and Customs have produced a comprehensive 100 page downloadable PDF called: ‘Expenses and Benefits – A tax guide’.
It is worth remembering that you cannot claim for something you didn’t actually pay for in the first place, or can’t provide evidence that you did.
You will be personally liable for any underpaid taxes NOT the company you’re working through or taking advice from.
You should therefore steer clear of companies and scheme providers promoting generous expense allowances with ‘NO’ receipts required.