Running your own limited company is full of challenges that you’re unlikely to face in other areas of life, one of which is managing business expenses.
Effectively managing these expenses can have significant tax benefits for your business, so it’s worth brushing up your knowledge on what they are, how they work and what steps you can take to use them to your advantage.
In this guide we will cover what limited company expenses are and other allowable expenses for limited companies, including:
1. Common Limited Company Expenses; Travel and Food
2. Eye Tests
3. Business Insurance
4. Working From Home Costs
5. Accountancy Fees
6. Staff Entertainment Fees
7. Equipment costs
8. Training and Development
9. Subscriptions
10. Marketing Costs
11. Other Expenses
12. Trivial Benefits
What Exactly are Limited Company Expenses?
In its simplest form, a business expense or limited company expense is any business-related cost incurred by you or your staff which can be claimed back from the company. Some of these are taxable, while others won’t require any contributions whatsoever.
There are a few things to remember when it comes to allowable expenses, including the fact that you can only claim for the expenses you incur while running your business. This also means that you are unable to claim for expenses that are for both business and personal use.
You can pay for business expenses through the company’s bank account or pay them yourself, after which you can be reimbursed by your company. If you have employees, you should have a policy in place to make sure everyone knows how much they can spend and how.
Allowable expenses for limited companies reduce the profit on which you pay corporation tax – so, more expenses mean less taxable profit and a lower amount of tax to pay.
It’s important that you keep accurate records of your receipts and expenses, so that you can explain them, if necessary, in the future.
What Expenses Can You Claim?
The most common type of expenses tends to be related to working away, including accommodation, subsistence and the actual cost of travel. While that’s all straightforward enough, there are plenty of caveats and criteria in place that can make claiming expenses a bit of a minefield. For example, the amount that you claim back for mileage will depend on the number of miles travelled. You’ll be able to claim back more for your first 10,000 miles. Claiming food expenses as a limited company can can only be done when your situation requires you to ‘eat out’ or if you cannot get home to eat, for example if you have travelled for business reasons. In this instance food is classed as a subsistence cost and can be claimed.
You’ll also need to be careful of the 24 month rule, which is used to define whether a workplace is temporary or permanent. You’ll only be able to claim the big three expenses of travel, subsistence and accommodation if your workplace is temporary – that’s to say that you don’t expect to be working at a particular location for any longer than 24 months.
Aside from these basic costs, there are a whole host of other expenses which can be claimed from your business, including:
Eye Tests
If you employ staff and most of their job is spent in front of a computer screen, then they can claim the cost of eye tests as part of your company’s expenses. Glasses and contact lenses may, sometimes, be claimed as expenses as well, but only if they’re required only for work purposes.
Business Insurance
If your insurance policies are for business purposes, then you can claim back their costs. This applies to covers like public liability insurance, employers’ liability and professional indemnity insurance.
Costs Incurred by Working from Home
If you work from home, you’re likely able to claim some of the costs associated with this. Usually, the most straightforward method when an employee works from home is to claim the use of home allowance, which comes to £26 per month and is designed to cover additional costs incurred when working from home.
Accountancy Fees
If your limited company engages the services of contractor accountants, such as Gorilla Accounting, you are probably able to claim back these expenses.
Staff Entertainment
Other expenses you can claim include Christmas parties and staff events. A Christmas party, for instance, can be a tax-free benefit, as long as certain conditions are met. For example, your staff can invite a partner but costs per head can’t go over £150 (including VAT) a year.
While almost every business expense must be ‘ordinary and necessary’, there’s still scope to be able to treat yourself and your staff to perks without adding to your tax payments.
Equipment
The equipment you use to do your job can also be an allowable expense for limited company cost. In essence, this refers to anything that’s necessary for your duties as a director, from computers to printers and software. You may be able to claim for the cost of furnishing an office as well, including chairs and desks.
Training and Development
If you’re self-employed, you understand the importance of professional development, since it can help you to grow your business and your career. Training and development courses can be claimed as company expenses as long as you make sure they’re eligible. For example, if you’re an IT consultant, you may be able to claim for a software training course.
Subscriptions
Work-related subscription services, which can be memberships to training trading bodies, are allowable as expenses, but you should first confirm it with HMRC. If the subscription is not directly relevant to your company or the work you do, it’s unlikely that you’ll be able to claim it as an expense.
Subscriptions to magazines and journals can also be claimed, as long as they’re relevant. This is good news, since these assets can help you to stay on top of the latest trends and competition.
Marketing
Businesses also incur marketing and PR expenses, so you’ll be happy to know that you can claim these costs as business expenses as a limited company. Whether you’ve spent money on a one-off ad or you have ongoing costs, you can claim them if the money has been used only to promote your business and not for personal purposes.
Other Expenses
There are many expenses that you may claim as a limited company, so you should discuss them with expert accountants who specialise in accounting for contractors and freelancers. This way, you can be confident that you’re not missing out on anything and are maximising your profit.
As limited company accountants, Gorilla can help you when it comes to your expenses, like whether or not you should claim the cost of your mobile phone, essential clothes and equipment, for example.
We can also talk about your business start-up costs and whether you’re able to claim for them. Typically, you can claim for limited company expenses for up to seven years before you start trading; these costs tend to include internet and domain name fees, accounting and legal advice and computer equipment.
You can also learn more about which expenses you can claim by checking out our Self-Employed Expenses page.
Trivial Benefits
In a nutshell, you’re able to spend up to £50 on benefits for each staff member as long as it isn’t cash, a cash voucher, a performance related reward, or isn’t in the terms of their contract.
You can’t spend more than £300 per staff member per year on trivial benefits, but they’re a great way to account for special occasion gifts without burdening your tax bill. In addition to this, there’s a £150 per head allowance for staff annual events which can cover the cost of annual staff Christmas parties, etc.
Manage Expenses on the Go with FreeAgent
It’s all well and good understanding business expenses but tracking them accurately throughout weeks and months can be a different beast altogether. Fortunately, there are plenty of tools available to help limited companies keep a record of each expense, one of the most common of which is FreeAgent.
Once you’ve appointed Gorilla Accounting as your accountant, you’ll have 24/7 access to the FreeAgent accounting software.
How many times have you misplaced that train ticket receipt from a long commute or thrown away a VAT receipt in error? Don’t worry, it happens to the best of us, but not so with FreeAgent. As well as being able to track your bank balance, invoices and tax dates, one of the most prominent features is the ability to upload receipts and expenses.
Simply photograph receipts using your smartphone, tablet, laptop or other device and they’ll immediately be stored in your FreeAgent profile, meaning that the days of spiked paper receipts are well and truly behind you.
How Can We Help?
As well as providing you with access to FreeAgent, your dedicated accountant will always be on hand to offer one-to-one advice throughout the year as you need it. You’ll be given a direct dial telephone number for easy contact, as well as being able to arrange face-to-face meetings, video conferences and email exchanges as needed.
We’ll be able to help you navigate your way through the maze of different expenses, all included in our simple monthly pricing plan of £85 + VAT per month.
To register your interest in appointing Gorilla Accounting as your accountant, contact us today and a member of the team will be in touch to talk you through the most beneficial time to switch.
