Category Archives: Deductible expenses

Childcare through your own limited company


Available from 2005 onwards “employer supported childcare” is basically a way to remunerate the employees where everybody is the winner tax-wise. Where the employer is your own company the payments made towards childcare, subject meeting the conditions, are allowed as a deduction and there is no tax or NI liability on the employee that is you. This legislation recognises that employees with children under 16 may have childcare costs and they wanted to make the payment of these as tax efficient as possible.

The conditions to be met are as follows:

• The child is the employee’s child or stepchild and is maintained (wholly or partly) at his expense or is resident with the employee or is a person for whom the employee has parental responsibility

• The care must be ‘qualifying childcare’. ‘Care’ means any form of care or supervised activity not provided in the course of the child’s compulsory education. To qualify the carer must be registered which means either the nursery is Ofsted approved or otherwise the carer registered with the local authority. A person is regarded as a ‘child’ until 1 September following his 15th birthday (or 16th birthday if he is disabled, as defined) and on until the end of the week in which that date falls.

• The childcare scheme is open to all the scheme employer’s employees

If the conditions are met in respect of part only of the childcare provision (for example if the arrangements change partway through the tax year), the exemption applies to that part.

How does it work?

Broadly there are two ways in which it works: either you operate it:

• as a salary sacrifice scheme, or
• as a benefit on top of the salary

Because it should be applied to all employees, if you wish to operate as a benefit then your future employees will be following the same scheme. A salary sacrifice scheme is that is applicable to you only.

To set it up your company could either buy child care vouchers from approved childcare voucher provider or pay directly to an approved childcare provider. Opting for childcare voucher may mean paying commission to the business that is issuing the voucher.

Your company ought to pass a Board resolution approving the scheme, and you could then keep the resolution as a record for future reference should there be any enquiry.

How much can you claim?

For the tax year 2015-16 a basic rate tax payer could claim up to £55 per week or a maximum of £243 per month. For a higher rate tax payer this is reduced to £28 per week or £124 per month. Each working person (parent/guardian) is entitled to this as long as you have a child in a qualifying childcare scheme. Both parents can claim and it does not matter how many children you have, and the claim is based on the maximum payable to the employee not dependant on the number of children. So if a company has husband and wife as directors both will be able to claim subject to the maximum limit.

Posted by admin at 6:20 pm
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Allowable expenses – small limited companies


In order for an expense to be allowed as deduction from a company’s income it must have been incurred ‘wholly and exclusively’ for the purpose of the trade. In other words personal expenses or expenses which are of a capital nature are not allowed unless specifically allowed. That said here is an indicative list of items which are usually allowed as deductions. It must, however, be noted that this note is very general in nature and items which are not straightforward should always be checked and confirmed before being claimed as expenses.

• Salaries paid whether to the directors or otherwise are allowable expenses including the employers’ national insurance contributions paid. However, if the company has paid salary in excess of the lower-earning-limit the company ought to register with HMRC as an employer, and the salary should be pay-rolled.

• Travelling and subsistence expenses whilst being away to a temporary workplace or on business are allowed as a deduction. This is a complex area because what constitutes a temporary and permanent workplace has been subject of court cases between HMRC and tax payers. Broadly any travel undertaken and subsistence paid for business purpose is allowable.

• Costs of advertising and marketing your business such as advertisements, websites, website hosting, networking etc are allowable.

• Pension contributions made on behalf of the directors in to an approved scheme is an expense allowed as a deduction.

• Travel and parking costs are allowable provided it is incurred for the business. Where own vehicle is used mileage allowance can be claimed @ 45p/mile for the first 10,000 miles, and 25p/mile thereafter.

• Expenses incurred for any training course will be allowed as a deduction so long as the skills acquired in the process are relevant to the business and its current earnings.

• Stationary, postage, and printing costs incurred for the purpose of the business are allowable as expenses.

• Business insurance, such as professional indemnity, employers’ liability, public liability etc. are all allowable as expenses

• Telephone and broadband expenses are allowed as deduction provided the contracts are in the name of the company

• Expenses incurred on mobile phones are allowable provided the contract is in the name of the company

• The cost of business calls made using a personal residential phone can also be claimed

• If you’re using your home for business purposes you could either use a flat rate of £4/week without receipts or work out a proportion of the household bills. The acceptable way is to first work out the total costs for a year and then allocate on the basis of the number of work hours used in a year.

• Computer equipments and software used for the business can be claimed as expense from the business. Computer equipments will be claimed through capital allowances for tax purposes.

• Expenses incurred on business gifts of value up to £50 to each individual could be claimed as expenses.

• Bank charges and interest paid on business loans are allowable.

• Expenses incurred on Christmas party could be claimed subject to an annual limit of £150 per person which includes your partner or spouse.

• Professional fees paid to accountants or solicitors will be allowed as a deduction.

• Certain professional subscriptions (e.g. Royal College of Surgeons, Nursing etc) are allowed.

• Business magazines and books purchased for business are allowed as a deduction

• Childcare Vouchers paid/issued by the company are allowed as deduction subject to a limit of £55 per week or £243 per month.

• Charitable donations made by the company to recognised charities will be allowed as a deduction.

• Commissions paid for getting business or payments made to a subcontractor are allowed as a deduction.

Global Accountancy

Posted by admin at 10:58 am
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