Updated: May 9, 2019
What business expenses can I claim?
A question I am often asked is “what company expenses can I claim?”
Unfortunately, there is no definite answer to this question. Expenses incurred often need to be evaluated on a case by case basis. In the case of an owner managed company this is even more so the case.
The general rule is that to be able to claim an expense it must be “wholly and exclusively” for business purposes.
For example, I am often asked if a director can claim a work suit as a business expense, assuming it is only used for business meetings. The answer is no, even when the client insists that they will only wear it to work. The reasoning behind this is that there is a duality of purpose. Although you need to wear a suit to work, you also need clothes for warmth and you could, if you chose to, wear the suit outside of work.
Listed below are a few common expenses that can be claimed. It is mainly aimed at an owner run business but can be used for larger companies too.
Please note that for self-employed individuals the rules differ, and this article does not apply to you.
The company can claim the cost of an accountant preparing the company accounts and tax return. Note however, that the company cannot claim the cost of your personal tax return as this is not for the benefit of the company.
Advertising and Marketing
The company can claim the costs of advertising and marketing. However, care needs to be taken here. If you are seen to be ‘entertaining’ clients or suppliers, this will not be allowable. For example, taking a client to a business lunch would be seen as client entertainment and no tax deduction would be given.
Fees incurred on a business bank account, whether bank charges or interest are valid expenses for the company.
Gift aid donations to registered charities can usually be claimed.
The company can pay for and provide you with protective clothing. For example, a hard hat on a construction site. Any other clothing is likely to be treated as a taxable benefit and will incur a tax charge.
The company can claim the cost for any computer equipment that is used solely for business use. You may use it for an ‘insignificant’ amount of private use. If it is deemed more than an insignificant amount of private use, then it will be treated as a taxable benefit and tax will become payable.
Food and Drink
If you are an owner run business, you may be able to claim food and drink whilst you are travelling. See travel and subsistence for more detail.
Home as Office
If you work from home, you can claim back the use of your personal residence for business purposes. You do this by asking the company to repay you the extra expense incurred as a result of working from home.
There are various ways of doing this and certain things you can and can’t claim for. You cannot claim any fixed costs that you would have incurred regardless of the business use. For example, rent, mortgage, council tax.
HMRC have stated that a flat rate of £4 per week can be claimed without any requirement to keep records. Above this and you would need to be able to substantiate the amount. E.g. taking records of meter readings for gas and electricity.
Hotels and Accommodation
If you are an owner run business, you may be able to claim the costs of hotels and accommodation whilst you are travelling. See travel and subsistence for more detail.
Business insurance, private liability insurance, employer’s liability or contents insurance for an office can all be claimed.
If you are an owner managed company, work from home and don’t have a separate internet contract for the business, you cannot claim back the cost of the business use of the internet. HMRC take the view that as most internet contracts now have a fixed monthly fee, you have not incurred any extra charge for using your internet connection for business purposes.
If you incur extra costs in the course of business, that can be substantiated then these may be allowable.
If you do not already have an internet connection and decide to obtain one due to business requirements, then you may be able to claim the expense.
If you have a separate internet contract for the business use only, ensure the contract is in the business name and paid for directly by the business. The company can then claim the full cost.
Except in specific circumstances the company can claim the full cost of any professional fees incurred for business purposes. For more information on those specific circumstances please contact us.
The company can pay for the subscription to any professional body on HMRC’s pre-approved list which can be found here.
If it is not on HMRC’s list, then it’ll likely be treated as a taxable benefit to the individual.
The cost of stationary used in the business is allowable.
Mobiles - Companies can provide employees with one mobile phone. However, any contract needs to be in the company’s name and paid for directly by the business. If the company pays for the individuals phone contract it will be treated as taxable benefit.
Landlines - The use of a home telephone can be claimed according to business use. This can be done by looking at an itemised bill. If the bill is a fixed amount and there is no extra expense incurred due to business calls, then you can not make a claim.
If you have a second phone line that is used solely for business, then ensure it is in the company name and paid for by the company. Then it will be fully allowable.
Travel and subsistence
Travel and subsistence can become complicated. We have a separate article entirely about it, which can be provided upon request.
As a general rule the company can pay for business journeys, and the expense will be allowable. However, travelling from home to a permanent work place does not count as business travel. Likewise, a journey that is made for both business and leisure will not be allowable.
If the individual is using their own car for a business journey, HMRC as an approved Mileage allowance payment scheme (AMAP) that can be used. This allows the individual to claim a fixed rate based on the miles covered. The company can then reimburse the individual based on the AMAP scheme. HMRC guidance on this can be found here.
Whilst travelling the company can pay for a meal and incidental costs. For clarification on these please see the more detailed article or contact us for more information.
Training employees is allowable if it is wholly and exclusively for business purpose.
If you have any questions on the above or require any guidance please contact us at your convenience.
The information contained within this document is correct at the time of issue. Advice should be sought from an accounting or tax professional before following any guidance.