Allowable Expenses for Limited Companies in the UK

As a limited liability company in the UK, it can be challenging to keep track of the allowable expenses you can claim for tax relief. However, without this knowledge, you would be paying too much corporation tax; we don’t want that.

So, whether it’s stationery items, phone bills, or even travel costs, you can claim tax relief on these overhead costs and make your business more efficient. This article will guide you through the tax-deductible expenses for a limited company.

Knowing the allowable expenses a limited company can claim provides a better understanding of your tax bill and leaves you with better revenue. We’ll also explore the fundamental rules of limited company expenses.

  1. The Fundamental Rules of Limited Company Expenses
  2. How To Claim Expenses as a Limited Company in the UK
  3. Limited Company Expenses You Can Claim
    1. Business Insurance Expenses
    2. Health & Eye Test Expenses
    3. Accommodation Expenses
    4. Marketing and PR Expenses
    5. Use of Home as Office
    6. Entertainment & Trivial Benefits
    7. Staff Party
    8. Equipment Expenses
    9. Travel Expenses

The Fundamental Rules of Limited Company Expenses

When you’re looking to claim limited company business expenses, you need to follow some rules. Below, we’ll be outlining the fundamental rules when you’re making a claim.

  • You can only claim the expenses incurred exclusively during the running of your company.
  • You can’t claim limited company expenses that have a dual purpose: business and home. An example is if you choose to extend a business trip for simply leisure purposes. You have to exclude the leisure days and request compensation for the business days alone when making a claim.
  • You can pay for limited company business expenses through the company’s bank account or reclaim the costs paid by you and later reimbursed through your company.
  • You can offset most limited company expenses against your business’s corporation tax liability. However, there are some exceptions, including business entertainment.
  • Always keep a record of running costs, including VAT receipts. Doing this helps you justify your actions if you’re queried about the business expenses you’re claiming.

How To Claim Expenses as a Limited Company in the UK

You can pay for your limited company expenses right from the company’s account. However, note that employees can claim costs as well. Therefore, it’s best to create a company expense form and policy so that everyone understands how much they can spend and where.

Also, ensure your staff save their receipts and collect the expense forms at the end of every month. Once you have the year’s purchase records and prove how much you spend on your business, you can claim tax-deductible expenses.

Note that you can file a claim through the annual self-assessment tax return. If you do, there’s no need to submit your record when turning in your tax return. However, prepare it in case Her Majesty’s Revenue and Customs (HMRC) asks.

Limited Company Expenses You Can Claim

According to the HMRC, there are many allowable expenses a limited company can claim. Although you know the common ones like business car mileage, office supplies, and tools, there are more expenses you can claim.

You can request the allowable expenses explored below to lower your tax bill.

1. Business Insurance Expenses

Your business insurance policies are part of your allowable expenses as a limited company. However, they should only be for business purposes. Protecting staff you hire and other assets is essential, and with an employer’s liability or business interruption insurance policy in place, you’ll minimise the risks your business will face.

2. Health & Eye Test Expenses

If using a computer screen is part of your employee’s job description, they could also claim eye exams as part of their health check. Again, this qualifies as part of the limited company expenses you can claim.

In addition, the cost of contact lenses or prescription glasses for your employees can also be part of your business expenses. First, however, ensure that the health and eye test are strictly for screen-based work.

3. Accommodation Expenses

If you go for a business trip and need to spend the night away from your home, the accommodation costs are part of the allowable expenses a limited company can claim. In addition, you can include the costs incurred for the drinks and food during the business trip. These kinds of expenses are part of travel and subsistence costs.

4. Marketing and PR Expenses

PR activities, advertising, and marketing also help you get your business in front of your target audience. Whether it’s a one-off or ongoing fee, it is part of the limited company expenses you can claim if you invested solely for business purposes.

5. Use of Home as Office

If you’re the only staff member and operate your business from home, you can claim a percentage of your rent and utility bills as part of the limited company expenses. You would have to draw a rental agreement between your home and the company because your business is a legal entity renting space from you.

You could claim the cost at a rate of £4 weekly or work out the rooms you utilise for business and the number of hours you use the space. Additionally, you can claim the cost of heating, lighting, postage, and printing costs. But, again, you can only make these requests if it is used solely for business purposes.

6. Entertainment & Trivial Benefits

You don’t have to pay tax when you give a gift or a benefit to your employee. As long as the rules below apply, you can claim it as allowable expenses.

  • It is not part of the contract terms
  • It isn’t a reward for the work or performance in the job role
  • It isn’t cash or a cash voucher
  • It costs £50 or less to provide the gift

If the gift or benefit provided to your employee doesn’t match these criteria, then you would have to pay tax for them.

7. Staff Party

Whether it’s a summer party for your staff or a Christmas party, it is part of the tax-deductible expenses a limited company can claim. As long as it costs less than £150 per person and is an annual event open to all staff members, you can request it as part of limited company business expenses.

8. Equipment Expenses

From software to computers to scanners and printers, the equipment necessary to help you perform your role as the director of a limited company is part of the company expenses. Therefore, you can include business equipment like desks and chairs as part of your claims.

9. Travel Expenses

You can also claim travel expenses as part of the limited company business expenses. However, you must be responsible for paying the travel costs and not your client.

Additionally, the travel should be for work purposes only, and you need to be present at the destination for the expenses to qualify. Finally, note that travel expenses don’t include the everyday commute from your permanent workplace to your home.

Below are the rates you can claim as part of the limited company expenses.

  • Motorcyclists – 24p per mile
  • Motor vehicles – 45p per mile for the initial 10,000 miles and then 25p for every mile afterwards
  • Bicycle – 20p per mile

Apart from lowering your total corporation tax bill, you can also reimburse yourself for the amount claimed. In addition to mileage, you can also claim road toll fees, parking fees, vehicle repairs and servicing, vehicle insurance, public transport fare, etc.

Nobody wants to pay more taxes than they have to. Therefore, knowing the limited company expenses you can claim is essential.

Remember that the costs must be incurred exclusively for business operations to qualify as allowable expenses. Ensure you also keep records of receipts as proof of your allowable expenses to HMRC.

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