What expenses can I claim as a contractor
working through my own Limited company?
If you’re a contractor working through your own Limited company and are outside IR35 then life is very simple. HMRC’s rules state that expenses can be claimed provided they are wholly and exclusively for the purposes of your business. This means you can claim costs like: company formation fees, accountancy fees, business travel and accommodation, postage, stationery, telephone calls, employer’s National Insurance contributions, subscriptions, insurance, contributions to an executive pension plan, business entertainment etc. There is a shortlist below and of course if you would like further details you can contact us on 01992 668599 or firstname.lastname@example.org.
What is a valid business expense?
You could claim actual meal costs whilst you are working at a remote site, away from your normal place of work, or when staying away from home overnight, but daily, round sum claims for meals are not permitted.
You can claim the cost of travel to and from your temporary place of work. This can include mileage and public transport.
The cost of hotel or bed and breakfast accommodation can be claimed as an expense, as can the reasonable cost of additional meals taken in conjunction with overnight accommodation.
The cost of ordinary clothes cannot be claimed however if you have an item of clothing that is essential to carry out your contract such as protective clothing or branded uniform this would usually classed as an allowable expense.
Providing that the training course is wholly and exclusively relevant to the performance of your duties under your existing contract then you can claim this as an expense.
Pensions are a great way to save for your future and reduce your tax burden now. We can provide further detail on this and work closely with an Independent Financial Advisor who can help you set this up.
Some contractors may have costs that they incurred prior to setting up their Limited company, such as travelling to meet a client, phone bills or equipment costs.
I'm inside IR35, what expenses can I claim?
If your contract is caught by IR35 then the only expenses claimable are: administration expenses which are fixed at 5% of your contract income, pension contributions and certain professional subscriptions. You should however, still record and receipt all business expenses.
Do I need to keep my receipts?
We recommend that you keep either the original or a digital copy of all your expense receipts because although your accountant will not need to see them, HMRC, if they choose to investigate, can go back as far as six years.
One final word, remember you cannot claim for something you didn’t actually pay for in the first place, or can’t provide evidence that you did. You will be personally liable for any underpaid taxes NOT the company you're working through or taking advice from. You should therefore steer clear of companies and scheme providers promoting generous expense allowances with 'NO' receipts required.