What expenses can my small business claim?

When running your own business, whether a sole trade or limited company it is important you are claiming as many of your expenses as possible.  As your businesses end of year tax is calculated as a percentage of your profits the more expenses we can deduct before reporting the profit the lower the tax due! That said, it only takes a quick Google search to provide you with an overbearing list of overwhelming and complicated advice on what HMRC will accept as allowable.

Here at Atkinson Accounts we understand how important your expense claim is to your small business. We have compiled some quick expenses tips with a detailed list broken into the relevant sections of those crucial allowable expenses.

If you have any questions regarding your expense claims please do not hesitate to get in touch for your free initial consultation.  You can email us at enquiries@atkinsonaccounts.co.uk or call 01244 316449.

 

What qualifies as a business expense?

HMRC state that for an expense to be allowable, it must be ‘wholly and exclusively’ for business use.  Another way to look at this is that an employee would need to do their job.

 

What are the two types of allowable expenses?

There are two types of allowable expenditure and these are treated differently within your businesses tax computation.  Both types of expenses can be claimed against your profits with a view to reducing your tax bill.  

1. Revenue expenditure – Any day to day expenses your business incurs. These can be backdated up to seven years prior to your small businesses trading start date.
2. Capital expenditure – Any fixed assets the company has bought. This is anything you buy that you expect to remain in the business for longer than a 12-month period. These can be claimed against expenses at their value at the trading start date.  g.  Jane buys a coffee machine for her coffee shop for £1,000 on 31^st January 2017 but does not start trading until 1^st March 2018.  As the machine will have depreciated in value by around £200, we would only claim the £800 against our profits.

 

Below is a detailed list of allowable expenses of both kinds for you to consider:

 Revenue expenditure

Purchases of stock/ materials

• Goods for re-sale
• Materials used as part of the work done
• Tools – hand and electric (not kept for more than 2 years)
• Royalties

Hire and lease Professional fees

• Accountants Fees including bookkeeping fees
• Legal costs including fee recovery and to fix engagements
• Subscriptions to professional bodies

Marketing

• Advertising, publicity, brochures, photographs, business cards and flyers
• Agents commission
• Gifts to charity/ local good causes and gifts to customers costing up to £50 and bearing the business name

Financial costs

• Bad debts (included in turnover)
• Bank charges (contact us to obtain free banking)
• Interest payable on a business loan. Also the incidental costs of raising that loan are allowable. (Careful as there are special rules if you use the “Cash Basis”)

Office Costs

• Books not retained for more than two years
• Bulbs, fuses, locks, keys, plugs, leads and minor repairs
• Data protection registration and renewal fees
• Heat and light – calculate business use on area occupied
• Insurance including office and business property policies
• Newspapers and journals (if specific to your work)
• Telephone:-
  1. Landline – request call transaction listing from the line provider to calculate business amounts
  2. Internet connection

• Mobile
• Coin box calls

Staff costs

• Wages and salaries – to be paid through PAYE
• Subcontractors
• Casual labour (check whether to be paid through PAYE)
• Pension contributions by an employer to a registered pension scheme in respect of any employee will be an allowable expense unless there is a non-trade purpose for the payment. One situation where all or part of a contribution may not have been paid wholly and exclusively for the purposes of trade, is where the level of remuneration package is excessive for the value of work undertaken by that individual for the employer, or the contribution is linked to the cessation of a trade. The deduction is for the period of account in which contributions are paid by the employer, and for no other period, unless either the deduction is for the period of account in which contributions are paid by the employer, and for no other period, unless wither the deduction is required to be spread over a number of periods, or the deduction is allowed for an earlier period
• Training for engagements in hand
• Courses to maintain, update & develop existing skilss are allowable however courses for the acquisition of new expertise is not allowable (i.e. it would be a capital expense)
• Workwear
  1. Hire of protective clothing/ uniform
  2. Laundering and dry cleaning of protective clothing/ uniform

• Cost of protective clothing/ uniform

1. Specific workwear for engagement (at behest of engager and no private use)

• Secretarial assistance including payments to spouse/ partner at the market rate for the work provided – to be paid through PAYE system
• Staff welfare including first aid and beverages and Christmas party
• Seminars

Computer costs

• Computer consumables including CDs, DVD, USB memory sticks, external hard drives, (backup) and software annual licence fee
• Data protection registration and renewal fees
• Batteries for radio/ cassette recorder/ calculator
• Memory cards
• Software for your computer, web domain registration and hosting fees
• Website maintenance, domain fee and cyber-cafes. Also updating is a revenue expense but the design of a website that will directly generate subscriptions etc may be capital expenditure on which you can claim capital allowances
• e.g. PCs

Printing, postage and stationery

• Courier charges Photocopying and printing
• Porterage, carriage, securicor
• Postage
• Journals and catalogues
• Stationery and printing including inkjet cartridges and toner

Entertaining

• Expenditure on business entertainment or gifts is not allowable as a deduction against profits, even if it is a genuine expense of the trade or business. However, if the total cost of all assets gifted to the same person in the same basis period is not more than £50, and the gift bears the business name, logo, or a clear advertisement, and the gift does not include food, drink, or tobacco, it is allowed. The cost of staff entertaining is specifically allowed

Fines & Penalties for a breach of regulations

• Or as a result of a prosecution for a trader’s breach of regulations, will not be an allowable expense. However payments for damages that are compensatory rather than punitive are tax deductible. Also, where an employer pays fines that are a liability of an employee, so that the employee is taxable on the payment as employment income, the cost to the employer of paying the fine is allowable in computing his/her trading profits

Miscellaneous expenses

• Give a full description of each item and state why you are claiming it

 

Motoring expenses (include motor cycle and/ or car)

• Keep a log of the total and business mileage for each vehicle so that the business element can be calculated:-
• Breakdown subscription/ insurance
• Car hire, petrol allowance to shared car driver
• Car repairs, servicing, MOT, oils, antifreeze
• Motor insurance
• Parking at engagements, tolls and ferries
• Petrol
• Road fund licence

Own property – calculate business percentage on floor area

• Cleaning
• Insurance
• Rent and rates
• Repairs and maintenance
• Use of home as office

Removal expenses

• If your business is not moving to a larger premises such expenses are allowed. However if your business is moving to a significantly larger location, such that removal costs will be an enduring benefit to the trade, the expenses are capital in nature and not allowed

 

Rent and rates of premises

• Calculate business percentage on floor area basis. Any premiums paid to a landlord are allowable if treated as a property business receipt by the landlord

Subsistence

• You are allowed to claim the cost of all your meals (and drinks) when on overseas engagements. Only claim the cost of the evening meal when on business in the UK and daytime meals incurred on business travel (itinerant)

Travel

• Bicycle repairs and maintenance, consumables and insurance – calculate the business use on a mileage basis
• Fares to the engager
• Fares to other than engager, e.g. suppliers, libraries, seminars
• Inoculations
• Travel cancellation fees
• Travel insurance
• Visas
• If you are overseas for more than 60 days on business, the expense of a journey made by your spouse/civil partner/child is also allowable but limited to two return journeys for each tax year
• Hotel accommodation

 

Capital expenditure

1. Agricultural buildings and works
2. Bicycle
3. Books including reference books
4. Camera, projector, screen
5. Carrying case
6. Computer and printer
7. Fax Machine
8. Goodwill
9. Industrial buildings
10. Know-how
11. Legal expenses on purchase of property
12. Motorcycle
13. Motor vehicle including car and van
14. Office furnishings including carpets and curtains
15. Office furniture including desk, chair, filing cabinets and bookcase
16. Plant and machinery (equipment)
17. Property
18. Photocopier
19. Research and development
20. Telephone including mobile phone

To discuss this is more detail with one of the Atkinson Accounts team please do not hesitate to call the office for your free initial consultation on 01244 316449.  Alternatively, you can email us on enquiries@atkinsonaccounts.co.uk and we will be happy to help.