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.
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