Company Expenses a Contractors Guide

HM Revenue & Customs business expense guidelines are varied and complex, getting it wrong can be expensive. To help ensure that you maximise your potential business expenditure without over stepping the line we have condensed and simplified them on a day to day expenses incurred by professional consultants as follows;

Providing a contractor is working at a “temporary workplace” during the performance of their duties, they are entitled to claim the costs of the following items of expenditure.

NB:-Determining whether your assignment is temporary or permanent can be a complex subject. For detailed clarification of whether your workplace clarifies as “temporary” please contact our team of dedicated professionals who will be happy to assist you in reviewing this vital aspect of your contract.

We can offer a one off expense / PAYE health check to ensure that you have been operating your company in accordance with the published guidelines, if you are interested in this review please contact us for more details

Travel

Own Car

Mileage can be claimed at the following HMRC agreed rates;

45p per mile – For the first 10,000 miles during the tax year (6th April – 5th April)
25p per mile – Miles in excess of 10,000 during the tax year

Petrol receipts are required

The above rates are reviewed and set each year by HM Revenue & Customs and are designed to be all inclusive covering; Petrol Costs, Depreciation, Repairs, and Tax and Insurance elements.

It is essential that you keep good business records, we recommend the following approach;

Keep a detailed mileage log for each and every business journey claimed, like the example below;

From: To:- Miles:-
Manchester Liverpool 50
1 High Street 2 High Street  
M1 2WD L1 2WD  

 

In the event of an HM Revenue & Customs PAYE audit you will be expected to produce the detailed mileage log to prove the expenses paid to you from the company.

We have designed an expense form to help our clients keep accurate records in this regard, these can be downloaded by following the link Expense Form. We recommend that you print these forms out and keep them together with all associated receipts relating to that particular payment period.

If you travel by motorbike or bicycle you may claim the following HM Revenue & Customs agreed rates.

Motorbike 24 pence per mile
Bicycle 20 pence per mile

 

Car Hire

The cost of a hire car can only be claimed providing there is no personal use of the hired vehicle. In addition to the hire car charges mileage should be claimed at the rate of between 7p and 21p per mile depending on the engine size and fuel type. Again, detailed mileage logs should be kept to support your claims.

If a car is hired and used for both business and personal use, then HM Revenue & Customs approved rates of 45p & 25p, as detailed above, should be used. No hire car charges should be paid by the company.

Other Modes of Transport

Providing the transport is business related any other mode of transport is acceptable as a business expense of the company. However, each journey must be backed up with valid receipts and we suggest writing a brief explanation of the purpose of the journey alongside the receipt.

Subsistence Costs

Contractors commuting from home each day to a “temporary” workplace are entitled to claim the “reasonable” cost of lunch. All such expenses should be properly backed up by vouched receipts.

Accommodation & Meals

Quite often contractors have to travel a significant distance from their home to undertake their contractual duties. If this is the case and they are required to stay in temporary accommodation during the working week, then the following items maybe paid by the company;

All of the above should be reimbursed by the company on an “actual” receipted basis, HM Revenue & Customs would expect the receipt to be signed by the proprietor with the address of the accommodation clearly highlighted on the receipt.

In addition to the accommodation amount claimable an individual is allowed to claim the “reasonable” costs of an evening meal. This item of expenditure must be vouched with a valid receipt.

Finally Personal Incidental Expenses can be claimed from the company. Contractors required to stay in temporary accommodation during the working week are entitled to claim the following amounts;

PIE’s are round sum allowances designed to cover general out of pocket expenses, such as, newspapers, laundry, phone calls etc)

Car Parking

Car parking costs at a “temporary” work location can be claimed and where possible should be backed up with a valid receipt.

Any motoring fines/penalties are not allowed.

The following items of expenditure maybe claimed irrespective of whether you are working at a temporary workplace.

Telephone Costs

If the contract for the telephone line (mobile or landline) is in a personal name, rather than the company name (John Smith Limited), then only relevant business calls maybe claimed. An itemised bill should be kept with the business calls highlighted for easy reference.

Should the line be a separate dedicated business line with the contract being drawn in the company name, then all costs incurred and line rental maybe claimed.

Christmas Parties

HM Revenue & Customs allow a special exemption for the cost of an “annual party”, commonly Christmas party, although any other annual company staff event would also qualify for the relief.

The general rules applying are;

If the event is only available to a select number of employees then relief for the cost is not allowed.

If the employer provides one annual function for employees, no charge to tax arises if the cost of the event per head does not exceed £150.

Professional & Trade Subscriptions

The cost of professional and trade subscriptions can be met by the company providing that the Society is on the list approved by HM Revenue & Customs found at https://www.gov.uk/government/publications/professional-bodies-approved-for-tax-relief-list-3/approved-professional-organisations-and-learned-societies

Office Consumables, Postage & Stationary

The cost of postage, stationary or other minor office equipment is generally accepted by HM Revenue & Customs provided you can demonstrate the expenditure via fully documented receipts.

Computer Equipment

Computer equipment can be claimed, however, computer hardware is classed as capital in nature and tax relief on the cost incurred will be given over a number of years, contact us for more information as certain items may qualify for the Annual Investment Allowance (100% write off in the year of purchase). Business software required within your business is allowed in full.

Training & Tuition Fees

Where training is business related any associated costs will be allowed as an expense of the business. The training should impart, instil, improve or increase your knowledge, skills or personal qualities which are likely to prove useful to you as an officer of the company.

Other Expenses

If you incur expenditure on any other business items that are wholly, necessarily and exclusively required to carry out your duties, then you may be able to claim reimbursement from your company. If you are unsure whether a particular item of expenditure can be paid for by the company please do not hesitate to contact us for clarification.