Claiming Limited Company Expenses

In a Nutshell

More Money

In a Sentence

Contractors running their own limited company can lower their tax bill by claiming business expenses that have been incurred in the course of their contract assignment.

As long as expenditure has been incurred wholly and necessarily in the day-to-day running of your business you can claim those costs back as expenses. It doesn't matter whether the particular contract at the time is caught by IR35 or not.

Exclusively

There is only one caveat, and that is the cost(s) must be exclusively for business purposes. If your purchase is for part personal use and part business then it cannot be claimed as a business expense.

Always keep any related paperwork relating to expenses, like receipts. You have to keep your receipts for seven years - so make sure your filing system & record keeping is robust.

IR35 Contracts

If you're working on a contract that is caught by the IR35 legislation then you can calculate your expenses at a set rate of 5% of that contract's gross value. You don't have to keep receipts in this particular case.

The 5% limited company expense is set at a level which should be adequate to cover your basic costs. This will, for example, cover your contractor accountant fees and other basic outgoings.

Allowable Expenses

Office Expenditure:

1. Stationary
2. Postage
3. Telephone
4. Internet
5. Magazine subscriptions
6. Home office

Contract Expenditure:

1. Travel/mileage
2. Parking
3. Client entertainment
4. Accommodation if away from home
5. Training
6. Subsistence
7. Computer hard/software

Professional Costs:

1. Company set-up costs/company returns
2. Accountancy fees
3. Bank fees
4. Insurance(s)
5. Company Hire-Purchase
6. Depreciation

This isn't an exhaustive list and it's important that your accountant is familiar with the expenses that can be claimed. This whole area is not straightforward so always check before you claim expenses through your limited company.