Guide to Expenses

This is just a guide about what you can claim as a legitimate business expense. When thinking about what you can and cannot claim just remember the simple rules. The expenses has to be "whole and exclusively for the use of the business". Please try and pay for the business expenses using the company credit or debit card.

Rates of reimbursement

• Motor mileage rate – the first 10,000 miles @ 45p, the balance @ 25p.
• Motor cycle – 24p per mile
• Pedal cycle – 20p per mile

Bus, train, taxi fares will be reimbursed on the basis of actual amounts paid. HMRC expect documentary evidence to be retained, but normally take a pragmatic view if some evidence is missing and it is clear that the journey was made. That is why paying with the company credit or debit card helps

Please can you make sure that you purchase your petrol/diesel on your company debit or credit card. We will then make the adjustment for mileage when preparing your accounts

Subsistence

We eat in order to live, not in order to work; but where the duties of the employment dictate that more is spent on food than would otherwise be the case, then the extra amount is allowable. In practice it is impossible to determine the extra amount so HMRC will allow the full amount of expense.

When determining the extra cost, the comparison is with the cost at the permanent workplace if there is one. In the case of the director running his/her own company, it is more likely that the comparison will be with home.

Overnight subsistence

If the duties of the employment dictate that you are away overnight, then you can claim the actual amount of the expenditure. This will include hotel accommodation plus associated meals, provided that the costs incurred are reasonable. HMRC will not sanction excessive alcoholic consumption and the claim must normally be restricted to yourself.

Staying with friends/family

HMRC will grant an allowance for the actual cost incurred so a claim is relevant only where a financial contribution has been made. It follows, therefore, that it is unlikely that there will be a receipt. Where it is difficult to obtain a receipt HMRC expect that a record of the expense is made at the time. We suggest that you make a diary note in order to back up the claim.

Personal Incidental Expenditure

When staying away from home there are often minor items of incidental expenditure that are not strictly allowable for tax purposes, however, when staying in the United Kingdom HMRC will not seek to tax an allowance of £5 pounds (£10 if abroad) per night on average.

Rented accommodation

Generally speaking HMRC do not object to rented accommodation where it is an alternative to hotel accommodation

Clothing

Any claims under this heading are likely to be limited to protective clothing such as boots, helmets, goggles, overalls, protective gloves. If you are working outside and need warm/waterproof clothing it is not an expense incurred in the performance of the duties – warm/waterproof clothing is required by all of us if we venture out on a cold wet day. It is important when claiming for clothing that the description on the claim form is accurate, and that it is backed up by documentary evidence.

Post, stationery and couriers

If you need to pay for postage, stationery or couriers, and it relates to the business ;then please pay for the item on you debit or credit card. If you do pay for these items by cash, please put the receipt in the envelope at the end of the month. If it was paid by cash please write the word cash on the back of the receipt.

Tools

Tools and equipment acquired and used in performing the duties of the employment, are allowable for tax purposes. There is a difference between large items of expenditure which could be considered to be capital in nature, and small items which could be considered as consumables. This would need to be looked at on an individual basis.

Training courses and Professional Membership

If you need to attend a CPD or CPE course, then these courses can be claimed as business expenses. Membership to professional bodies that relate to the trade of the company i.e GMB, ACCA can be claimed as business expenses. These should be paid directly from the business bank account.

Insurance

All businesses should have the minimum of Employer Liability insurance. Also if you work in a professional field, you should have Professional Indemnity insurance. Both of these insurances are whole and exclusively for the use of the business. These again, should be paid for from the company bank account.

IT – Hardware and Software

If you need to purchase IT hardware and software for you to complete your work, then it can be purchased by the company. Again these items should be purchased from the company bank account. This hardware and software must be wholly and executively for business use.

Telephone including Internet

The bottom line is that business calls are allowable and private calls are not allowable. Problems arise with an all-inclusive phone as it is impossible to distinguish between business and private and as a result HMRC will not grant an allowance, however; any payment for calls over and above the monthly payment can be reimbursed based on the business proportion. What we normally recommend that you get a separate phone for business use.

Reimbursement to use a phone at home is restricted to the cost of business calls only.

Reimbursement of a home broadband Internet connection is unlikely to be allowable for tax purposes – extract from the HMRC manual – "No deduction should be permitted for Broadband Internet access where the employee is able to use the Internet for non-business purposes." We are back to the wholly and exclusively argument and the same principles apply, as did to the line rental in the previous paragraph.

Client Entertaining

One of the most common questions we get asked is what do I do when I take out a client for Lunch or Dinner? The Answer is not that simple, as saying yes you can claim it. It is seen as a business expense but not for tax purposes. This means we add it back to you profits when working out your Corporation Tax. This again should be paid out of you business account, but when submitting your receipts you should write on the back the name of the person taken out and whom they work for.

If you do not submit the receipts will assume that this is private dining and add it to the amount we take as dividend.

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