What Expenses Can I Claim with a Limited Company? HMRC Allowable Expenses
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- เผยแพร่เมื่อ 21 ต.ค. 2024
- What expenses can you claim with your limited company? This video will outline many of the expenses your company can claim as an allowable expense for corporation tax relief.
We'll also discuss some of the disallowable costs that can create a benefit in kind for you as the director or your employees. Some expenses can be reclaimed from the ltd company as an out-of-pocket expense, but your company won't be able to get tax relief.
Read more from our post: blog.juniperly...
Quick links:
1:05 - Entertaining
2:27 - Travel & Subsistence / Mileage Allowance
4:49 - Tools & Equipment
5:39 - Stationery / Office Supplies
6:00 - Staff Training
7:35 - Uniforms (Branded Clothing)
8:07 - Protective Clothing & Equipment
8:43 - Internet & Telephone (Mobile Phones)
10:14 - Software & Web Hosting
11:00 - Advertising & Promotion
11:37 - Use of Home Allowance
12:40 - Medical Costs
13:44 - Subcontractors, Employees & Service Costs (labour)
14:21 - Limited Company Pension Contributions
15:22 - Fixed Assets
17:22 - Disallowable Expenses (benefit in kind)
Most importantly after watching this video, you will be able to distinguish between what expenses HMRC would consider allowable for tax purposes and what they may question if your company is ever investigated.
For new limited company directors (or even existing directors) this is absolutely essential knowledge so you can avoid major tax problems later on down the line.
#juniperlynx
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Hey guys, thanks so much for watching our video on what expenses you can claim with your Limited Company! To get started and setup your own company, or to switch to us, just visit: juniperlynx.com/contact/
Loving these videos - in the process of setting up a company having been made redundant so finding this so useful - thank you. I'm a video producer so already have a lot of the equipment I need - where do they factor into all this? Thanks
Again, one of the clearest and simple videos on this I have seen. Wish I had seen it a few years ago when I started my company! Many thanks!
Your a class help pal good teacher so easy to follow not like a lot lol. ✊😁👍
Thank you for the time stamps in the description. Great channel for small businesses
Thanks for your awesome comment!
"Okay, we are in my computer"
*Looks around the room nervously*
Great content. Question about groceries: What if I have a catering budget for my company/staff for lunch/kitchen and I purchase bulk groceries supplies from a cash and carry. What is your view on that?
Could you do a special video on CIS and other construction industry schemes. Thank you.
So if i pay myself a wage including tax free dividends of £14,500 a year then well claiming millage, £4 a week for utility bills and charging the company is this all tax free and even though this would increase my wage per month i still wouldn’t have to pay tax
Great video. I’ve subscribed.
How often can you replace your mobile phone? Also can you replace your laptop/pc every 2 years?
Thanks for subscribing! Your company would need to make those decisions based on what's required for day to day running and its financial position. For example if you need decent equipment and find that after two years the hardware becomes too slow, you would be able to justify purchasing a new phone/laptop. It's not unusual for technology to have a shorter lifespan of 2-3 years. HMRC's general guidance is that the purchases aren't 'excessive'.
Truly outstanding 👏
Very helpful and clear. Thanks
Thank you for sharing such easy to understand info
Glad it was helpful!
Thanks for the great video Caroline, very helpful 👍
04hmanzoor no problem! Glad to help :)
thank you for this informative video. I'm due to file my tax this october and I'm looking for an accountant to sort out my tax.
You are so smart and I enjoyed your videos very much. Thanks
thank you , very impressive introduction,
Any links to HMRC guidance on this area?
Really usefull and helps me a lot, thanks Caroline.
My pleasure! Thanks so much for your comment :)
Brilliant video. If I work as a consultant, and travel to a specific area to work on different projects in different places, but stay with family to do this, can they use the tax free lodger allowance and I pay then through the business in order to stay there as accommodation for business purposes. I believe the lodger allowance is £7500 a year. Would they need to set up an airbnb or similar style arrangement to make it official if so?
what about meals when you go out to buy some goods for your e-commerce business and you got hungry? :)
Thank you, it is really extra helpful.
Glad it was helpful!
I found this so useful and easy to understand! I have one quick question, if I purchased an item ahead of the business trading date, can I claim this as a start up cost? Thank you so much!
Thanks for your comment! You are absolutely able to add any pre-trading expenses to the company accounts.
Pre-incorporation expenses are a little more tricky. Basically if you purchase items that were 100% for business use just before the company was created, it's possible to sell the items to your company for the same price. This creates the exact same outcome as buying them through the business account. Just make sure you have a record of the sale to your company along with the original receipt for reference.
I was going to ask the same as I got all my own business stuff to start up. Bought my own van own tools and am in debt small amount for some. And still paying it back do they count to? New with tide myself trying to get a grips with it all. Cheers John McBride.
Great video. Thanks a lot for all your tips, they're really helpful! I really enjoy the way you present information in all your videos; it comes across as really accessible and fun :)
I just had a quick question regarding expenses. I setup my own business about a year ago and it will probably take us around 18 months to fully develop the product we want to sell and start making money. As the company has no income, I am just using my own money to cover all expenses during this period. In your experience, in this situation do sole directors like myself usually just add up all the personal outlays at the end of the year and mark it as a director's loan on the company accounts or do they just keep the expenses as personal, non-business expenses. I'm not sure which is best. If you put them through the company using a director's loan does that mean they can be used to offset income in future years when we start making money?
You should definitely track all the costs that are going into the business so your company can pay you back later. it's not exactly a loan but more of an expense reimbursement :) If the company makes a loss then it would be carried forward to future years' profits.
Amazing Chanel! Subscribed
Great vid!
Very helpful! Many thanks for your sharing. I'm also interested in your screen demo in which you can use a pen to write something. Could you tell me which software you use to make your talk amazing.
Very useful! Don't understand the difference though between say, buying a business suit form the company (not allowed for tax purposes) and reimbursing the employee (or director) for purchasing it themselves... isn't it the same thing... same money leaving the company?
Hi Peter, thanks for your comment! Purchasing a suit with the company card, or personally and having it reimbursed to the employee/director, would not be an allowable business expense in any case. A suit has a 'dual purpose' element which basically means that you would be able to use the suit for personal reasons as well as business reasons.
In this case the expense would be treated as a benefit in kind unless you can repay the company for the purchase. If it is left in the business as an expense, HMRC will likely challenge it if the company ever gets investigated.
The only case where clothing can be explained as an allowable business expense would be if it displays your company's logo. This is because you would be advertising your business anytime the clothing is worn.
Please note we always recommend seeking out the help of a professional to assist you with the accounting requirements for a limited company. Our videos are purely for informational purposes only and should not be used as tax advice.
@@JuniperLynx Hi Caroline, Thank you so much for taking the time to clarify this for me!! Can't afford an accountant this year so doing it myself. My Asperger's means ambiguities can be a nightmare!! :) Thanks again!
This is great thank you 💯 I’m wondering how you can use your personal phone as a business phone.. because I’d also use it for personal.. maybe getting another sim is a good idea 💡
What about the motor insurance and the car's monthly payments? If I have a lease car or buy a pcp car, can I claim the monthly installments as an expense?
Company cars can be complex with regards to their tax treatment. If the company does not own the car, then only the mileage allowance can be claimed as an allowable business expense. This factors in other expenses in addition to fuel as well as wear and tear. A company owned car would likely create a benefit in kind which would incur personal tax and national insurance. The company would be able to pay for all expenses related to owning the car, but ultimately the additional tax and P11D requirements doesn’t make it very beneficial to do so. An electric car is more beneficial due to the lower benefit in kind rates. However these may increase in the future.
I've got a question for you if you don't mind. Let's say that you use personal car to go from your office address to work... a lot of Ltd owners do that specially if they are in the beginning of the business. If the car brocken down can you clame some repairing expenses, because you been using it for business purposes?
Thanks for your question! HMRC's mileage allowance is intended to go towards any wear & tear of the vehicle in addition to the fuel cost. This means even if you break down on your journey to a client site or business meeting, you wouldn't be able to claim any extra costs from your company associated with the breakdown. The mileage allowance helps you calculate the exact portion of the business related travel. For example the car could have broken down regardless if you were travelling for business or not. It's really difficult to calculate so that's why they created the allowance. Similarly, you couldn't claim a portion of road tax from your business as this expense would exist regardless of your business. I hope that helps!
@@JuniperLynx thanks a lot
That you for you video. It is great.
What about buying a car? Is it allowed?
What happens if I decide to not have a fixed office but work remotely in different location (Stays like hotels or AirBn). Will that type of expenses be tax deductible?
If the accommodation costs are 'wholly and exclusively' for the purpose of trade (i.e. a location closer to your client for necessary visits, up to 24 months as it needs to be a temporary workplace), then they can normally be claimed as a regular business expense. You would be expected to return to your home each week or as often as possible depending on practicality.
However if HMRC sees that there was no reason for you to travel place to place, they could challenge the expense. There is some further information available in the internal manual: www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim31836
Hi lovely Caroline, great video, so if I took a training course and obtained a qualification to complete a contract, in real terms I get 19% corporation tax relief back, but I still have to cough up 81% of the cost. There is no way to wangle totally free training then?
Nicholas Mead hi Nicholas, your company can fully pay for your training and get 19% corporation tax relief. That means you don’t have to personally pay for it from already taxed funds. There’s no way to get free training unless a company is running some kind of introductory offer. Someone has to get paid :) You may be able to reduce the cost further if you’re VAT registered on the standard rate scheme. This only works if the training course includes VAT.
Hey great content once again, just a quick question can a computer be classed as a company expense if it used to execute work
Computers can be a business expense but the accounting method used may be different. If the computer would have a 'useful life' of 2 years or more, then you would normally add this as an asset purchase to your company instead. This would be depreciated over its 'useful life'.
hi excellent helpful video thanks. if you have purchased a company car with your own personal money at start of company & paid cash are you allowed to claim all purchase price back?
Thanks a lot for your useful information. May I know if it's okay to expense coffee / snacks that are put in pantry and share with every staff?
Thanks for your comment! Office coffee, tea, milk and ready-to-eat snacks would be ok if they're available to all employees. This wouldn't create a benefit in kind. Just remember to check the VAT rates if your company is VAT registered as many of them are 0%. On a similar note, alcohol would not be allowable for any tax relief (VAT, Corporation tax, personal tax).
Hi,
So first off, great video.
I have a small question though.
If I purchased myself a MacBook that I pay off in instalments for college but MAINLY for my business, can I claim it back and if so how?
The contract is under my mother's name due to her credit score and the fact that I'm just a student and I wouldn't get it myself. Would that cause any implications?
Best Regards.
Hi Miss,
i have a limited company, i'm a director and single-owner of my company. My company is register in UK (London) but i live in Montecarlo (individuals do not pay taxes in the principality). My question is this: if the turnover of my company (net of all the deductible costs) is over 600 thousand euros a year, is it possible to transform 95% of the net income into salary for myself? In doing so, my salary in the principality of monaco would not be taxed. Thank you bye
From the company perspective, yes you can run a large salary. However the personal tax aspect of this can be very complicated so I would recommend speaking with a tax advisor before going ahead with this.
@@JuniperLynx Thank you miss
Hi
5. Staff training - if i go for training like Manager training , time management
Am i allowed to claim it?
8. Phones - Can i have 2 mobiles one o contract and one top up just in case if one broke down?
11 home allowance - can i claim if i do have got office in town Am I able to claim on top of that ? claim office and home allowance
I hear each share holder is allowed a £50 voucher per month. Think it’s a voucher for something like amazon etc. And it’s tax free. So long as it’s not more than £50 each
HI Juniper, you have mentioned that mobile for business purpose is not dual but then I need two mobile numbers - one for business and one personal.. is this you trying to convey? please clarify how to avoid dual purpose.
Hi,very informative ,one question can i claim relief for life insurance.
Thanks for the comment! Currently you can only claim tax relief through your company for two kinds of life insurance: Relevant Life Policy or Key Man Insurance
@@JuniperLynx honestly you're making a lot of accountants HATE you. But success will KISS you for your generosity.
Thank's a really good vid reily helpfull
Is reinvesting profit under a UK company taxed or not?
Thanks for your comment! That would depend on what you're purchasing. For example if you want to reinvest in the company by providing further training to yourself or employees in the same trade sector, then this would just be a revenue expense and receive normal corporation tax relief.
If your company purchased stock (i.e. extra products or materials to later sell), shares or cryptocurrency, these purchases would not be added as an expense for corporation tax relief until they are sold.
Some assets do allow for corporation tax relief under AIA or WDA. I would recommend speaking with a qualified accountant so they can advise on your specific circumstances.
I hope you will answer my question, as a photographer creating content I have to buy a variety of outfits for models to pose in called wardrobe where they will wear it for photo shoots only and leave it on the rail, I then have to wash that for when another model wears it later down the line, is this acceptable as an expense?
Thanks.
Hi Caroline, if I put run my property business (furnished flats with 3-4 individual tenants sharing) through a limited company, can I include the cost of the actual flat as an expense ie £200-300k? And all the set up - refurbishment, buying beds, sofas, fridges etc. I assume if yes, then it gets split up over a few years? Would be better if it did but then I also can't see how you would ever make any profit unless you could carry over the loss every year. Hmmm actually I'm only putting down 25% deposit and the rest is mortgaged, so actually I only technically have purchased 25% right?
Thanks for your comment! Normally the cost of a flat is treated as an Asset. You would only account for the cost of an asset (as an expense) upon selling the property. I would recommend speaking with a tax advisor that specialises in property income. This is a complicated area of tax due to differentiating between assets, improvements and expenses/running costs.
@@JuniperLynx many thanks! So yes I understand (as have taken on a local accountant since asking this!) - the cost of the property is included when selling it, under capital gains tax
Hey there, got a question about paying rent, example if you need to pay for your rent can you pay through your business account and then claim it back? Or through personal account after transferring from business account and claiming back? Also would like to know if you are renting e.g a warehouse for your stock can you claim back the cost of the rent for the year? Thanks Martin
If your company needs to pay for rent, it can do so directly from the business bank account.
If you pay for business rent with a personal account, your company would be able to reimburse you for the cost. Taking the rent money from the business and then paying for it yourself wouldn't have a different outcome (it just takes more steps to complete the same payment).
Renting a warehouse to keep stock would be an allowable expense to your company. It would get full corporation tax relief on the whole cost during the year.
So when you calculate corporation tax at the end of the year, you would take the total turnover in the business and subtract the allowable expenses (which would include rent in this case). The remaining figure would be subject to 19% corporation tax. The less profit there is, the less tax your company pays. This also means there is less available for you to take as dividends.
I hope that helps :)
@@JuniperLynx Thanks Juniper makes it a lot clearer! Could I also ask why do I need to pay myself with dividends? Can't I use my own business profits? Or transfer into my personal account? Sorry with all the questions just thinking to starting a business and trying to get the best advice/help incase I get stuck, thanks Martin
@@martinrutkowski1121 Your company has a few ways it can pay you. I would recommend watching our video which explains it in more detail: th-cam.com/video/VGiYlYiFKrg/w-d-xo.html
Hi, thanks for this info, asa new director it is really helpful. Are you allowed to pay for car lease expenses through the business please?
Thanks for your comment! You can pay for a car lease however be wary that HMRC will automatically consider company cars to be a benefit in kind. They will expect you to use it for both personal and business travel and it's very difficult to prove otherwise. If the car is considered a benefit then you're better off paying for it personally. You'll get taxed each year the company provides you with the car. This can be a complicated issue though so I'd recommend speaking with an accountant/tax advisor about your specific circumstances.
You didn’t include public liability insurance etc as an allowable cost, accountant fees etc
Thanks for your comment! You're absolutely right, most expenses that are incurred as a direct result of trading through your company (such as business insurance, accountancy fees, Confirmation Statement filing fee, professional membership fees) would be allowable for corporation tax relief.
hey Caroline. I loved the video, Very informative, i do have a question regarding the travel expenses though. Does travel expenses fall under the bracket of public transport? For example, i spend 230 a month on a travel card to go to work an home. Would this be eligible for a expense? Thanks!
Thanks for your comment! If you are using public transportation to get between your company's registered office address (or principle place of business address) to client sites, then this is absolutely an allowable business expense under the Travel category. It can also include taxis :)
Hello, im contemplating if i am to leave my current umbrella company or go ahead with Limited Company. Wanted to have more clear view before diving in to Limited Company
It depends on your working arrangements. If you are working for yourself and earning more than about £110-120 per day then you may want to consider opening your own limited company. There are upcoming changes to the IR35 legislation in April 2020 that means clients will be responsible for determining your status as 'inside' (treated like an employee) or 'outside' (working for yourself as a contracting business). They would also be responsible for deducting employment taxes if you're found inside. I definitely recommend checking what contracts are available as 'outside IR35' in your trade sector before making a decision. If you're finding quite a few that are outside then switching to a limited company would certainly be an option for you :)
Awesome! Thanks.
Is that 0.45p/mile figure different for electric vehicles (EVs)?
Currently electric and hybrid cars are treated in the same way as petrol and diesel car for approved mileage allowance payments. This is if you're using a personal car for business travel.
So if you break HMRC's laws you get fined. What does happen to HMRC if they don't keep up with their obligations?
Nothing... they will definitely say sorry to you...😁
Hi, May I ask - the Pension contribution paid directly by the Ltd into a personal pension scheme, you've said that it is an allowable business expense, but on the Company tax Return (Micro Filing) do you include the figure within the Staff Costs line or Other Charges line of the return?
Staff pensions would normally be added to Staff Costs just like salary :)
It may be worth considering making the pension contributions on a salary sacrifice scheme, this can reduce the employee's National insurance and also the company national insurance contributions...
thanks for sharing this info, now i know what we can claim , how do we do it? as it will be my first time next year :)
The simplest way to keep track of your expenses (whether they are paid for personally or directly through the business account) is to have a bookkeeping software. Any software that allows you to add out-of-pocket expenses and explain the business bank transactions would be suitable. We recommend FreeAgent as it's currently the most user-friendly. Xero also works but you have to remember to manually add the corporation tax calculation if you have a limited company.
Juniper Lynx thanks for the information. What about quick books? There popular but are they as good?
My personal preference is FreeAgent. I recommend creating a free trial account and testing them out yourself :)
Thanks. Silly question but do I get back 100% of the expense that I have a receipt for? Example - a hotel I needed to stay in on business cost £79 for a night, do I get it all back or part of it?
OnPoint Apartments yes your company will be able to pay you back 100% of the business expense :)
Hi there. I am a private tutor and education coach as a sole trader. My business is solely online. I need a mobile phone, laptop and tablet. Is there a price limit on each item? For example 1500GBP for laptop, 650GBP for laptop and 850GBP for phone. Are they equipment expense or fixed asset? May I deduct all from the tax I need to pay in the fiscal year or something like depreciations?
I understand suitcase is dual purpose item and it is logical. What about briefcase, laptop and tablet cases? Are they which is only to carry our laptop and tablet dual purpose item or tax deductible?
Hello. Are most of these applicable to Sole Traders there a video particularly for these?
Many of these would be applicable to sole traders excluding Use of Home Allowance and Christmas party allowance as these are specifically for employees of a company. Sole traders do have their own version of the use of home allowance and they can actually include a portion of their rental costs into a custom calculation (limited company directors would not be able to do so).
@@JuniperLynx thanks, thats very good to know.
Hi sorry I'm confused.....
When you say we can claim back.
Do we actually claim the money back and get the money paid back to us? If so how can we go about doing this?
Last year my accountant done my accounts I got nothing paid back to me. And I got nothing this year either?
Thanks
Hey Tony, thanks for your comment! If you pay for business expenses with your personal account (credit/debit or cash) then your company can repay you for these costs. It's simply a case of setting up a transfer to yourself for out-of-pocket expenses. The expense will also reduce the company's corporation tax.
If you pay for all business expenses through the company bank account, then there wouldn't be anything to reclaim. Those costs will just go towards reducing the company's corporation tax bill.
The result of both scenarios is exactly the same. In the second example, you're not paying for anything out-of-pocket so there is nothing to repay yourself for.
I hope that helps :)
Hi, what happens if it’s a small online business limited and you don’t have an accountant. Can I still make my own account? Thanks
Thanks for your comment! While you can do this and take the time to learn accounting, I wouldn't normally recommend it unless you have experience with producing accounts, checking current legislation, and ensuring that HMRC is happy with what you're doing.
Often mistakes are made without you realising until HMRC investigates it 2-3 years down the line which could risk everything you've built. If it's a small business I normally recommend starting out as a sole trader to keep your legal filings to a minimal level (a self-assessment). Then once you've grown something more substantial (around 30k profit per year) you can look at converting the business into a limited company structure. At this point you'll have the funds to pay an accountant to help with all the filing/bookkeeping requirements and ensure it's all done correctly to keep your business in good standing with HMRC.
Thank you, very helpful.
what expences can i claim on a rental property ?
You can claim many maintenance costs for your properties. Double check what type of property it is because there are different rules for holiday rentals/residential properties. Basically you'll need to ensure you're not expensing any 'capital costs'. For example improvements to the actual house could be considered capital expenses, rather than revenue expenses. You'll get relief on these when you actually sell the house. I'd recommend speaking with an accountant. Also HMRC has lots of guidance on this topic online.
Why does HMRC say you can claim 45ppm allowance but in reality it is only a percentage of the 45ppm?
Thanks for your comment! Would it be possible to elaborate your question? You can claim the full 45p per mile as an expense from your company for business travel. The full 45p per mile can be reimbursed to you from the business bank account as a repayment. If you are referring to the corporation tax relief, you can offset the full mileage claim against the company's profits so it saves 19% just like any other expense.
I claimed my 45ppm not as self employed but just normal tax relief as agency worker. I added all my mileage up and they only gave me a percentage of the 45ppm.
@@wormwood6424 In that case it sounds like the employer has only given you their own mileage allowance, which they are able to do. For example they might decide they only want to reimburse the fuel portion of your travel costs so they're allowing a claim of 20p per mile.
However if you were to submit a self-assessment with HMRC, you can add allowable expenses that the employer didn't reimburse you for. Please ensure that you have kept a mileage log of your business travel in case HMRC wants to see evidence of your claims.
The self-assessment entry would be the difference between the full 45p per mile and the amount your employer has already contributed. So if they only paid 20p per mile as an example, you can add business travel costs of 25p per mile (multiplied by the number of miles traveled) to make up the difference. This expense claim would reduce your total taxable income for the year so you can get the tax relief that way.
I hope this helps!
Possibly what happened was I worked out the allowance mileage owed instead of giving them the full mileage so I inadvertently shorted myself?
I have logged everything yes.
thanks for this! is there like a document i can get from HMRC with all of this?
Thanks for your comment! HMRC has their own internal manual which outlines many scenarios. I can't say it's very fun to read but you can find it here: www.gov.uk/hmrc-internal-manuals/business-income-manual/bim45000
Juniper Lynx thanks so much ! Can I DM you on Instagram. I just chartered ACCA would be great to connect :)
expences would be on a limited company as a sole trader. what can i claim ?
Jennifer Lenny thanks for your comment! I’m not sure I understand though, if you have a limited company then you wouldn’t be a sole trader. You could consider yourself to be running your own business but the income your company makes is legally separate to your income. If you are a sole trader you can claim many similar expenses but there are a few variations. For example you won’t have the use of home allowance. It’s a different calculation. There are other allowances you can use for subsistence costs. Most of the other expenses that are wholly and exclusively for the purpose of your business would be allowable.
What about Groceries for staff canteen?
Fantastic
Thanks very useful. Any idea if roofing costs is an allowable expense (home re-roofing)?
Great question! Roofing costs are a bit different as they could be considered an improvement to the house, meaning you can only reclaim the cost when you sell the property to reduce the capital gains tax due. If you're repairing the roof, for example replacing some tiles then these can be expensed as normal against the rental income. You may find this HMRC guide helpful: www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-working-out-your-rental-income#capital-expenditure
Hi, if I cycle for my business, do I also get a milage allowance?
You can get Cycle to work scheme. If you buy a £2k bike you can knock 2k off of your salary to lower your tax bill.
absolutely! If your company owns the bike, then you can either use the mileage allowance, or pay for the actual wear & tear costs on the bike. If you're using a personal bike for business travel then you can simply get mileage reimbursed to you at a rate of 20p per mile.
Thanxxx
This is going to sound like ridiculous question. But when we say "allowable costs" and "put through", what exactly are we talking about?
Are allowences "claimed" just taxed at a lower rate?
Are these offset against company profit?
Fruice Lee that’s a good question! As a director/employee of your own limited company, there are certain expenses you can claim back (get them repaid to you). Most of your company costs can be paid for directly with the business bank account however some like mileage and home internet would need to be claimed back from the company. Allowable expenses, whether reimbursed to you or paid for directly with the business all reduce your company’s profit which ultimately reduces corporation tax. I hope that helps!
Fruice Lee, I think you were asking how is the allowance deducted, right? I'm sure it's like this, if an allowable expense was £100, hmrc would not apply corporation tax to that part of the company profits. I think it's pegged at 19%. Your corporation tax bill would be £19 bucks cheaper, but the company profits will be £81 lower.
That's how I understand it, but may be other can advise if I'm wrong.
hmm so what if I want to eat a cucumber for a lunch or an apple ?
It's technically ready to eat, but ultimately HMRC can make the final call depending on your justification so it's hard to say for sure.
17:58 this is what I came here for! Regular overnight stays away from home. Any detail on this on other vids?
It really depends on what you're doing for the overnight stays. Could you describe it in a little more detail? Such as renting a place for the weekdays as you need to be near a sight, but you go home on weekends, renting a hotel room for business trips etc. The topic can be a little technical so it's difficult to include every scenario in a video :)
@@JuniperLynx ok, home location A, work location B. 70 miles separates A from B so it's not an easy daily commute on windey roads. It would mean over 3 hours spent commuting per day, or 15 hours per week. So, Monday-Friday, I would rent a room. Although it would be a room for my exclusive use, it would not be my main home residence. I read somewhere about a 2 year rule but for employees of companies (a company can use the employees expenses against their tax), I wonder if this applies to sole-traders too?
So, home address A is where the sole trader has all correspondence delivered, but Mon-Fri, he lives (stays) at B. Can this rent/expense be tax deductable from profits? If so, up to what amount? Thank you Juniper Lynx.
@@ppppugh7892 From what you've described, it appears that the room is purely rented out so you can complete your services for your business. This would be an allowable expense so long as you go back home on the weekends. You would just expense the total paid for the room against your business profits. Travel between the two would also be allowable.
There is a 24 month rule that HMRC enforces for employees. It basically means that after you spend 24 months at the same client site, it becomes your usual place of business and therefore traveling there would not be an allowable expense. This would just be the same as an employee commuting to work. As you know, no employees can claim their commute costs from their employer without creating a benefit in kind :) It's not exactly the same for sole traders, but the principle still applies where traveling to and from your usual place of business would not be justifiable as an expense to the sole-trader business.
We have an article that may also help explain the rule in more detail: blog.juniperlynx.com/hmrc-24-month-rule-are-you-misinformed/
@@JuniperLynx thank you for the link, I've just read it and its very informative. So to confirm please, Mon-Fri accommodation costs are tax deductable from profits in full for sole-traders? There are no daily £ limits? And the weekly commute from A to B is also deductable but not from B to the worksite, daily, correct? Thanks again 🤗
@@ppppugh7892 It's a little more straightforward 😊
If you had to rent out a temporary accommodation for reasonable access to a work site, this expense would be 100% for the business. There would be no other reason for you to have it and you're not benefiting from it in any way personally as you still have your main home that you go back to. In this case you just claim the entire cost as a business expense.
Any business related travel (wholly and exclusively for the purpose of business) would be allowable as well. This could include the weekly travel to your temporary accommodation, as well as from the temporary accommodation to any work site you may need to visit. If you're using a personal car then you can claim the mileage allowance. Public transportation costs would be included as a normal expense, so the exact amount you paid for it.
You should be able to reasonably justify the costs to HMRC if they ever came into question. Ultimately HMRC will decide if the cost was reasonable for your company based on your justifications.
If im a stand up comic, and I want to make a joke about a Yacht, but i need a yacht for research; can I write it off?
It's unlikely that the yacht can be evidenced as being 'wholly and exclusively' for the purpose of trade in this case. HMRC would challenge this purchase and may even consider it to be tax fraud.
@@JuniperLynx oh i dont care about this anymore, thanks for reminding me im still subscribed to you
Who are you (Background) and why should I watch your video (save £££)? That's what I want to know before I watch your video as a new viewer.