Advertising & Marketing
Annual health check e.g. BUPA
Annual return fee (Companies House)?
Bicycles – mileage payments (own bike)
Bicycles – protective equipment
Books & Magazines
Christmas / annual events
Clothing – uniform and protective
Company startup fees
Computer hardware and software
Credit and Debit card charges
Directors loan account
Donations to charity
Extended working hours
Flights (except first class)
Hire purchase (in company name)
Incidental overnight expenses
Interest on business loans
Key man life insurance
Late night transport home (after 9pm)
Medical expenses (overseas only)
Mileage expenses when using personal vehicle
Mobile and smart phones
Professional fees & subscription
Software (installed and online / subscription)
Travel and Subsistence
The guidance on what are allowable expenses is complex and needs to be considered based on individual circumstances. No responsibility can be accepted for the tax status of any expense claims made.The information provided on this page is for guidance of inniAccounts customers only and no action should be taken without specialist advice.
Accommodation Return to list
Assuming that you are not caught by the 24 month rule, you can claim for the cost of hotels and B&B’s near to the place of work provided you have another principle residence.
The claim is allowable for contractors and freelancers that say live in one city and need to be in another. If you have come to the UK from overseas to work then claiming such expenses are unlikely to be allowable as that residence is likely to be classed as your normal residence.
Should rented accommodation be more economic and practical, it can be treated as an allowable expense provided the costs are reasonable. Should HMRC view the costs as excessive then they are likely to take the view that the accommodation is of personal benefit and are likely to challenge the claim. When signing up for a rental agreement or lease, it should be in the companies name and paid for directly by your company.
It is important to remember that there must be no personal benefit to any claim such as providing residence for family members, i.e. it must be necessary, wholly and exclusively for the purpose of the business.
Assets Return to list
An asset is something of value that is owned by your business such as computer equipment or machinery. An asset is often described as something that has value and that is able to add value to your business, for example a video camera owned by a media company. The camera in its own right is owned by the business and has value plus it is used in the day to day activities of the business to add value.
Bicycles Return to list
The way expenses are claimed is dependant on who owns the bike. If the bike is owned privately, 20p per mile can be claimed for business mileage.
Alternatively the Cycle to Work Scheme allows employers to purchase bikes and safety equipment and provide them to employees. The scheme must be open to all employees and the bicycle must be used for business purposes more than 50% of the time. The equipment is tax deductible for the business and is loaned to the employee with no benefits in kind (P11D) liability for the employee. Note that the 20p per mile tax free mileage allowance for business travel cannot be claimed if the bicycle is owned and loaned to an employee by your company.
There is no limit on the cost of the equipment including the bicycle however, if the value of the equipment exceeds £1,000 a consumer credit license is required from the Office of Fair Trading. Full details of the scheme can be found here.
If you do purchase a bike through the company all you need to do is record the purchase by selecting the purchase an asset option in your bookkeeping screen when it appears on your business bank statement.
Bicycles – mileage payments (privately owned bike) Return to list
If a privately owned bicycle is used for business related travel, the employee may claim 20p per mile under the HMRC approved mileage scheme. Simply record the journey in your mileage log, set the vehicle to bicycle and inniAccounts will take care of the rest. When you next create a payslip the cost of the journey will automatically be reimbursed to you personally.
Note that the 20p per mile tax free mileage allowance for business travel cannot be claimed if the bicycle is owned and loaned to an employee by your company (Cycle to work scheme).
Bicycles – protective equipment Return to list
If you use the Cycle to Work scheme, protective equipment can be claimed and items include:
- Reflective clothing
- Bike / spoke reflectors
- Bells / horns
- Mudguards (to ensure visibility is not impaired)
- Cycle clips
- Panniers / luggage carriers to allow luggage to be transported safely
- Locks and chains to ensure for security
- Pumps, puncture repair kits, cycle tool kits and tyre sealant to allow for minor repairs
Books & Magazines Return to list
Provided the purchase is necessary to conduct the activities of the business, the item can be claimed. To give an example, if a technical manual is purchased specifically related to work being conducted, it can be claimed.
If however a book or magazine is of benefit personally or is to aid in the development of a new skill, the item will not be tax deductible. In such cases if it is paid for by your company and enjoyed by you personally it will need to be captured on a P11D for the benefit in kind and result in additional tax and NI liabilities. In these circumstances it is probably best to pay for the item personally.
Broadband / Internet Return to list
If the broadband contract is in the company name and therefore invoiced to and paid by your company, then the full cost can be claimed even if there is a small amount of personal use.
If the broadband is billed personally and the contract is not in your company name, then only the portion of business use can be claimed. This must be worked out and evidence provided if requested by HMRC.
Car parking Return to list
Car parking can be claimed for qualifying business journeys that:
- form part of business activities, i.e. site or client visits
- journeys related to attendance at a temporary workplace
Christmas / annual events Return to list
An annual event such as a Christmas party can be claimed provided:
- It is an annual event such as a Christmas party or summer barbeque
- It is open to all employees
- The cost per head does not exceed £150 (including VAT)
If the £150 is exceeded then tax must be paid on the whole amount, not just the amount that exceeds the £150. It is not an allowance so it cannot just be claimed and it cannot be offset against the cost of more expensive events.
You can also provide more than one annual event during the tax year provided the combined cost of the events does not exceed £150 per employee. The event is not just limited to the cost of the entertainment, it can include the cost of accommodation, travel etc.
The partners of employees maybe invited, again provided the same is offered to all employees. Where a partner attends they also receive a £150 allowance – that’s £300 in total per couple.
Full details about annual parties can be found in the HMRC Employment Manual EIM21690.
Client entertainment Return to list
Typically entertainment of a prospective or existing client is not a tax deductible expense and although it can be paid for by your company, no corporation tax relief will be given.
In reality the true benefit of client entertainment isn’t from the tax deductions but from the gesture and what it can do for your business in the future!
Clothing – uniform and protective Return to list
You can claim the cost of either of the following:
- necessary protective clothing to conduct duties such as safety footwear or glasses
- work uniform worn whilst carrying out your duties for example, a coat that carries a distinctive logo of your company
Course Fees Return to list
Provided the training is work-related to upgrade a current skill and not to develop a new one, the cost of the training can be claimed along with costs associated with the training such as books or additional travel costs incurred.
Should the training be overseas then details may be scrutinised in more detail by HMRC. It is recommended that full details of the training be retained including receipts for the course, the course itinerary, evidence of attendance, accommodation expenses that cover the period of the training etc – essentially everything needed to demonstrate that there was no personal benefit.
Directors loan account Return to list
If you borrow money from your company’s bank account and it is not a salary or a dividend, then it’s a loan from the company to you. This is recorded on your director’s loan account and it is said to be overdrawn. The loan can be then be repaid by paying the money back into the company bank account or by the company crediting the loan account using a salary or dividend payment to clear the loan. When crediting the loan account a dividend or salary is recorded but not paid out – it is used to clear or reduce the balance of the loan account.
inniAccounts allows you to manage director’s loan accounts however you must be aware of the potential tax implications both for you personally and your company. If at any point the outstanding value of the loan to the director exceeds £10,000 in the tax year, the company will need to pay Class 1A National Insurance and the director will need to pay additional tax. This is declared on a P11D.
Depending on how your loan account is managed, it will determine what you need to tell HMRC and whether you need to pay corporation tax on the loan amount.
If you clear the entire balance of your director’s loan by the last day of your company’s financial year:
- you do not need to pay Corporation Tax on the loan
- you don’t need to tell HMRC about the loan on your Corporation Tax Return
If your director’s loan account is still overdrawn after the end of your financial year but it is repaid in full within nine months of it:
- your company does not pay tax on the loan
- details of the loan must be included on your Corporation Tax Return
If your director’s loan account is not paid off in full within nine months after the end of your financial year end:
- You must pay Corporation Tax on the loan which currently is 32.5% of the loan value, e.g. if your Directors loan account is overdrawn by £10,000 you need to pay £3,250 in additional corporation tax.
- You must pay HMRC interest which is non-refundable.
- You must include details of the loan in your Corporation Tax Return.
If you pay the additional Corporation Tax of 32.5% of the loan value, you can reclaim this from HMRC once the loan has been repaid to your company. However, the claim will be made nine months after the end of the financial year in which the loan was paid off therefore you may be in for a long wait!
It is important that you notify inniAccounts if a loan to a director exceeds £5,000 at any point.
Details of how to use the director’s loan account in inniAccounts can be found here.
Extended working hours Return to list
If you work extended hours e.g. you are contracted for 8 hours per day and you work for 12 hours, it would not be unreasonable to claim the cost of an evening meal. However, if you are contracted to work 12 hours per day the cost of meals would not be allowable.
Eye tests Return to list
It you regularly use a computer in your day to day activities then the cost of an eye test can be claimed. The cost of glasses however cannot be claimed for unless they are prescription safety equipment.
Gifts Return to list
Gifts to customers are not a tax deductible expense unless they are promotional gifts worth less than £50 and carrying a conspicuous advertisement for your business.
Glasses Return to list
In most instances glasses and contact lenses cannot be claimed as a business expense. Even if you require glasses to use a computer to fulfil your company activities, chances are that you probably use them outside of the work environment too, e.g. for reading, therefore they cannot be claimed for.
If however a prescription is required for glasses that are solely to use a computer for business purposes and they are not used elsewhere, then this is allowable provided you have evidence to support it. Other examples would be welding or safety glasses.
Home Office Return to list
There are two common approaches used for home working expense claims, a fixed allowance or apportioned expenses.
The fixed allowance is designed for when only a minimal business related activities are conducted from home, for example maintaining records or invoicing clients.
From April 2012 HMRC allow a flat rate claim of £4 per week (or £18 per month for employees paid monthly) for incidental home expenses – in other words, if you primarily work at your client’s site and only use your home office for managing your business you can claim up to £208 per year. So if you simply use your computer at home to tidy up a few loose ends and you do not qualify as having a ‘dedicated home office’ that you conduct business from, you should stick to claiming this £208.
When claiming the fixed allowance you do not need to keep any records of the household expenses you are claiming. This claim is also exempt from reporting on a P11D (benefits in kind) provided all the following apply:
- the individual needs to work from home, because the activities must be conducted at home which is where the business is based
- the claim isn’t more than their additional household expenses
- the claim isn’t more than the current weekly (or monthly) limit
So you don’t miss out making this claim from your company you can use Regular payments & savings. This will allow you create a recurring payment, say once a year for £208 or more frequently if you prefer. With a regular payment set up you will see a pending payment in your bookkeeping then you can simply pay yourself personally the sum from your business account and mark the pending payment as paid. Alternatively you can enter the amount into your Quick Entry and reclaim them on a payslip.
Dedicated office space – apportioned cost
Conducting your day to day business from a home office means that a greater portion of the running costs of your home can be claimed. In this case you can apportion some of your household bills based on area, usage and time.
From the HMRC manual BIM47815 on use of home for business and apportioning the expenditure it is quoted;
“… it is possible to apportion the use and cost of a room on a time basis, and to allow the expense of the room during the hours in which it is used exclusively for business purposes.”
In applying the above approach it is important to be aware that the room made available for business purposes also needs to retain some residential use. If this is not considered then there is the risk of Capital gains Tax complications when your property is sold. In the room having multiple uses and by applying apportionment, you are therefore demonstrating residential use.
So how do you apply this approach?
To begin with you need to consider how you are going to approach the ongoing calculations using this method. One challenge is that your bills don’t arrive on the same date and you need to retain copies just in case HMRC need to take a look.
Step 1 – Decide how you are going to approach it
When a bill arrives you could just claim a portion of it from your company there and then or, if you wanted to do it less frequently say towards the end of your financial year you could collate bills throughout the year in readiness then make a single claim.
Step 2 – Work out the area allocated for business use
There are two ways you can do this, either by working out the percentage of the overall floor space or, by the proportion of the total number of rooms in your house. You’ll need to exclude your bathrooms, kitchen and hallways from your assessment.
Step 3 – Work out the running costs of your property
Gather together all the bills you can claim for including:
- Council tax
- Mortgage interest (not capital repayments)
- Maintenance & repairs
- Utility bills (gas, electricity, oil etc)
- Repairs (only general household costs e.g. roof repairs, not decorating a room not used for business purposes)
- Business telephone calls on residential line (use itemised billing)
- Telephone and broadband standing charges
Step 4 – Apportion the costs
Using an example, lets say that you have a total figure of £10,000 that you are going to apportion. If your house has 6 rooms and you use one room, then 1/6th is apportioned, i.e. £1,667. If you work 10 hours per day then you apportion the costs for that room for business usage, i.e. 10/24. Therefore £1,667 x 10/24 = £694.
If you are working from home then you are perfectly entitled to make a claim – just make sure it is realistic and reasonable. You must keep a record of your calculations should HMRC ever request them. As always there are many in’s and out’s of making a claim so always read HMRC guidance – a few useful examples are available.
Note on working from home & business rates.
The Valuation Office Agency (VOA) provide guidance on if your residential property will become liable for business rates when working from home. In most cases for contractors and freelancers business rates will not apply and the VOA give examples to help you assess.
Incidental overnight expenses Return to list
Assuming you are not caught by the 24 month rule and you stay away from your main residence for the purpose of business, you can claim up to £5 per night when staying in the UK or £10 per night if overseas to cover incidental expenses such as newspapers, laundry, phone calls etc. These claims do not need to be receipted however it is not an allowance therefore you cannot just claim £5/£10 in full and you must only claim the actual amount of the incidentals incurred.
The claim for incidentals is over and above the costs of subsistence such as evening meals.
To record and claim the cost of incidentals in inniAccounts simply make an entry in the personally incurred expenses section of Quick Entry and make an entry for your incidentals. They will then be reimbursed on your next payslip.
Insurances Return to list
Insurances required by your company to conduct its duties such as Professional Indemnity, Employers Liability and Public Liability can be claimed for.
Health insurances policies are not a business expenses and are therefore not tax deductible.
Mileage expenses when using personal vehicle Return to list
Mileage claims can be made for business related travel only. Often the easiest way to claim for travel costs is to use a personal vehicle and claim for the mileage at the HMRC approved rates. The advantage of using mileage rates is that they are based not just on the cost of fuel, but also costs such as insurance, road tax and maintenance, therefore it saves you having to keep details of your actual motoring expenses.
Mileage rates are used to work out the amount that can be paid free of tax under the AMAPs legislation.
The current rates for use of a personal vehicle are:
|First 10,000 miles||10,000+ miles|
Using the mileage log in inniAccounts makes this really easy – the claims are paid back automatically to the employee on the payslip plus it keeps track of the 10,000 mile limit and adjusts the rate accordingly. Additionally if you enter a ‘default mileage’ into your contract you can quickly make an entry into your mileage log by simply clicking the mileage checkbox for each day in your timesheet.
As with all expenses, HMRC expects you to be able to provide evidence to support mileage claims, e.g. a mileage log which is accessible in your Report Centre. If you do not maintain a log and cannot provide it to HMRC if requested, then Income Tax and National Insurance will be due on the mileage payments.
If you are inside IR35, travel and subsistence expenses are not allowable expenses.
Mobile and smart phones Return to list
The simplest way to claim for a mobile or smart phone is to purchase it through your company and have the contract in your company’s name. This way, even if there is a small amount of personal use, the purchase and contract costs can be claimed.
If the contract is in an individuals name and not the company, then only the calls made related to the business may be claimed. If this is the case then an itemised bill will allow such calls to be identified. If the contract has inclusive minutes and only the inclusive minutes are used in a billing period including business calls, then no claim can be made. HMRC are likely to take the view that no additional expenses in making business calls have incurred and therefore a claim is not allowable.
Moving house Return to list
The HMRC criteria that should be used to determine if relocation costs are allowable are:
Firstly the reason for relocation must be one of the following:
- you or an employee started a new job
- a change in employment duties
- a change in the place where employment duties are normally carried out
Secondly the expenses and benefits must fall into one of the six categories below:
- the employee’s sale of their old residence
- their purchase of a new residence
- transporting the employee’s belongings to the new residence
- associated travel and subsistence costs
- domestic goods for the new premises
- bridging loans
Thirdly, there is a time limit:
- To qualify, the expenses must be incurred or the benefits must be provided before the end of the tax year after the one in which the your circumstances changed (as outlined in the first step of this list).
Fourthly, the distance:
- the new residence must be within reasonable daily travelling distance of your new normal place of work, and your old residence must not be within reasonable daily travelling distance of the new normal place of work.
Pension payments Return to list
If your company is to make employer contributions direct into a pension scheme, these will be tax deductible. You should always seek financial advice from an Independent Financial Advisor to determine what is the best strategy for you, be it personal or company pension contributions.
Professional fees and subscriptions Return to list
If you are a member of a HMRC approved professional organisation related to your business activities, then the fees can be claimed.
You may get tax relief on professional fees and subscriptions if:
- you are registered as a member of the organisation because it’s necessary to your work and,
- HMRC has approved the organisation
HMRC approved organisations can be found here.
You cannot claim fees and subscriptions paid to an organisation that HMRC hasn’t approved or if the subscription is a life membership.
Travel and Subsistence Return to list
Provided the requirements of the 24 month rule are met, you can claim for travel and the related costs i.e. accommodation and subsistence. The costs of travel such as train tickets and taxi fares that are necessary for the provision of services and operation of a business can be claimed.
Whilst working at a temporary workplace you can claim for lunch but always ensure that the cost is reasonable and receipts are retained.
If you are staying away from home then the cost of accommodation, breakfast, lunch and evening meals can be claimed provided the costs are not excessive. If you do stay away from your main residence, then you can also claim for incidental overnight expenses.
Meals do not have to be purchased from a restaurant therefore a pre-packed sandwich from a supermarket would be an acceptable alternative. You cannot claim for ingredients to make a meal yourself.
If you are inside IR35, travel and subsistence expenses are not allowable expenses.
Travel Cards Return to list
Your company maybe able to save money by purchasing travel cards instead of paying for individual tickets. If you also use the card for personal travel then the personal benefit from your company may result in additional tax / national insurance being due. If however the cost of the business travel had it been paid for by purchasing individual tickets, exceeds the value of the travel card purchase, then the travel card can be used for personal travel and no additional tax / national insurance will be due.
More information can be found in the guidance on HMRC website.
If you are inside IR35, travel and subsistence expenses are not allowable expenses.
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