Clearview National July 2016 - Issue 176 | Page 74

INSTALLERSUPPORT

ALLOWABLE EXPENSES FOR CONTRACTORS

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BELOW IS A LIST FROM TAX SMART Group of‘ common expenses’ claimed by the majority of contractors operating through a limited company. This list is not exhaustive, for the A to Z of expenses allowable under a limited company please visit the HMRC website and use search term‘ expenses and benefits a to z’.
As a general rule of thumb, you can reclaim all expenses that have been incurred wholly, exclusively and necessarily in the course of running your limited company.
There are variable rules around expenses that have a dual purpose( i. e. for both personal and business use), some are allowable based on a simple calculation( proportion of utilities if working from home) and some are not allowed regardless of their business proportion( mortgage interest, council tax).
There is no order of importance to the order in which these have been listed:
1. Director’ s salary Typically, a Sole Director should take around £ 8,060 p. a. which is £ 672 per month and just below the Primary Threshold( PT). If the Limited Company has an employee other than the Director and is paid over the £ 156 per week then Tax Smart Group recommend the Director takes a salary of £ 11,000 in order to maximize the Annual Personal Tax Allowance and reduce the Gross Profit by an additional £ 2940 and save £ 588 on the Corporation Tax bill.
2. Salaries paid to Employees It is possible that you may ask your spouse or another member of the family to help you with the management of your limited company affairs. You can register this person as an employee on your company payroll. This individual can take advantage of receiving up to £ 11,000 per annum tax-free. This £ 11,000 per annum salary paid to your spouse / employee is 100 % tax deductible.
3. Employer Class 1 NIC contributions payable on salaries to company employees If you employ an additional employee and pay them over £ 156 per week you will be liable to 12 % Employers NIC. You will receive Employment Allowance of £ 3,000( as of April 2016). Any Employers NIC paid over this £ 3000 is 100 % tax-deductible meaning that it is deducted from your Gross Sales before the CT is calculated at 20 %.
4. Mileage allowance of 45p / mile for the first 10,000 miles, and 25p / mile thereafter for own vehicle use Even if you are a passenger in a vehicle, travelling for business purposes, you can claim for 5p / mile. For motor bikes, there is a flat rate of 24p per mile, and for bicycles 20p per mile.
5. Parking Costs You can also claim for parking and the congestion charges but you may not claim for parking fines or speeding fines.
6. Public Transport The cost of travel by public transport can be claimed but you must have a valid receipt. When claiming travel expenses it is advisable that you keep a note of the dates, reason, locations mileage, type of transport etc.
7. Subsistence Subsistence includes meals and accommodation when travelling to a temporary place of work. This is in addition to other necessary costs of travelling, e. g. parking charges, tolls, congestion charges or business phone calls.
8. Training course fees As long as the skills are relevant to the business you are in.
9. Stationery, postage, and printing costs
10. Business insurance The most popular types of business insurance such as public liability, employers liability, legal expenses, tax investigation, and professional indemnity insurance are all legitimate business expenses, and are 100 % allowable.
11. Company formation and ongoing costs( e. g. Annual Return fee) Although the company formation fee is a‘ capital cost’, and cannot be set off against Corporation Tax, when using some accountancy services, such as Tax Smart group, there is no cost when setting up your Limited Company.
12. Home Bills can be claimed but you must calculate these correctly If you have to work at home on a regular basis, you can only claim for things to do with your work, e. g. business telephone calls, mobile calls, broadband or the extra cost of gas and electricity for your work area. Directors( and employees) can’ t claim back any proportion of rent, mortgage interest, or council tax from their companies, as these costs would have been paid personally anyway.
13. Purchase of Computer equipment and software.
14. Advertising and marketing of your business.
15. Business gifts up to £ 50 per individual are allowable before more complex rules apply.
16. Bank charges.
17. Christmas party exemption for directors and employees of £ 150 per person per year( you can include your partner or spouse).
18. Professional fees, such as accountant or solicitor.
19. Professional subscriptions.
20. Capital allowances( depreciation of assets).
21. Business magazines and books.
22. An eye test for employees who use computer equipment.
23. An annual private health check for employees.
24. Pension Contributions
This article is just for guidance only. Expense claims are a complicated area of taxation, and you should always consult your accountant if you have any questions.
www. taxsmartgroup. co. uk
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