There is a wide range of limited company contractor expenses that can be claimed back. These expenses can be used to reduce a company’s profitability in its accounts – this reduction in profit bring down the size of a corporation tax payment.
All sole traders, partnerships, and limited companies (including contractor limited companies) may spend up to £200,000 on capital items. This is called the Annual Investment Allowance. Capital items include office furniture, cars, computers, tools, software, and more – items which have a long-term usefulness for the purposes of trade.
Capital items bought for a limited contractor company must only be used for business reasons and not for personal reason (for example, a laptop).
All capital expenditure under £200,000 may be listed as “revenue expenditure” on financial accounts meaning that the total value of the items reduce the level of profit made, thereby reducing any resulting corporation tax obligation.
Note – the capital allowance will be increase for 2 years from 1 January 2019 to £1,000,000
Note – capital allowances for cars and vehicles depend on CO2 emissions
If a company buys a capital item on hire purchase or if the company leases a capital item, then the amount paid in interest and on the lease part of any payments counts as “revenue expenditure” meaning that it can be used to reduce corporation tax.
Only clothing which is used “wholly and exclusively” for the purposes of business or a staff member’s employment is allowable. For example, protective clothing on a building site or within a chemical factory is permissible however clothes that can be worn for work and for leisure are not.
If a director or a member of staff of a contractor limited company is sent on a training course which better equips the company to be more competitive or which imparts new knowledge to an employee or employees, training is 100% allowable if paid by the company or paid by the director who is then reimbursed by the company.
Business communication costs are allowable expenses – these include telephone lines, call charges, stationery, printing, photocopying, broadband lines, and so on.
If these accounts are held in the name of and paid for by the contractor limited company, the costs are 100% allowable. However, if the accounts are in the name of the director, then only part of the costs may be allowable.
Entertainment is not normally an allowable expense. Claims can not be made for entertaining customers, suppliers, and clients nor can they be made for corporate hospitality.
Companies have a yearly budget of up to £150 including VAT per staff member to spend on entertainment – including food, drink, travel expenses, and accommodation. Most companies spend this on Christmas parties however a company can choose to spread the entertainment budget over a year. However, if more than £150 is spent on a staff member, then it becomes a benefit-in-kind and it will be liable for income tax, Employee’s National Insurance, and Employer’s National Insurance.
Subsistence is the term used by HRMC to describe providing oneself with food and drink at a minimal level solely for the purposes of carrying out business.
It is not considered as subsistence if a contracting limited company director or employee consumes food or drink at home or within the workplace as this consumption is done for the “purpose of survival”, the term chosen by various different tax tribunals on the subject. Subsistence is the cost of meals, drink, and accommodation away from the normal place of work – for example, as would happen on a business trip.
To qualify as a business expense, the travel undertaken which required a contractor or employee to eat and sleep away from their home or work premises must have been done so “wholly and exclusively” for the purposes of trade. This includes trips made to suppliers, to clients, to different work sites, to events, and to attend training courses.
If a contractor and their staff members (that is, someone on the payroll with an employment contract with the company) are away on business and the company pays for the meal, this is allowable as subsistence. Expenses incurred must be “reasonable” and at a “minimal level”. A reasonably priced meal in the hotel or at a local restaurant will normally be fine.
A contractor may claim hotel accommodation costs for nights spent away and for the cost of a rental property if the costs are incurred exclusively for business purposes.
For contractors and their staff using their own cars, they can claim 45p a mile for the first 10,000 miles and 25p thereafter. For motorbike users, the amount is 24p per mile regardless of the number of miles.
Hire car expenses, rail travel, air travel, tolls, taxi and bus fares, parking charges and congestion charges are allowable as long as the expenses are incurred wholly in the pursuit of business.
The cost of travelling to locations which aren’t a contractor or their employee's normal workplace is allowable, subject to the 24 month rule and the 40% exception rule.
When working for a client, a contractor cannot claim travel expenses once the work for a client has gone on for longer than 24 months or if an extension has been granted to previous work which would take the cumulative time spent with the client over 24 months.
Contractors can disregard the 24 month rule if they spend 40% or less of their time at a workplace as long as that workplace is temporary.
Although not exhaustive, the following items also qualify as expenses for corporation tax purposes:
Any contractor considering switching to an umbrella company will want to know how to find the best provider to work with.
Although you could spend your precious time and energy searching the web for the best umbrella company, there is an easier way – using an umbrella calculator.
In this guide, Umbrella Supermarket explains why every contractor should use an umbrella calculator in 2021.
If you are considering contracting you will need to decide on PAYE or umbrella.
It can be a difficult decision to make and contractors will inevitably be questioning which option will be the best for them.
To help every contractor get on the right track for them, in this guide Umbrella Supermarket looks at PAYE vs umbrella, outlining the key differences and how this will impact you.
There are many reasons that contractors across the UK opt to work under an umbrella company.
Umbrella companies offer an easy way to contract and remove the need for the contractors to worry about the burdens of admin, finances, tax and IR35, all things that limited company contractors have to deal with.
For this reason, many contractors will be weighing up their options and questioning whether it is worth using an umbrella company in 2021. To help make the decision that little bit easier, Umbrella Supermarket has put together this guide on the pros and cons of using an umbrella company.
Any contractor that is considering operating through an umbrella company in 2021 will need to understand Umbrella Company fees - from why an umbrella company charges fees, how they are paid to how much the contractor will pay.
In this guide, Umbrella Supermarket answers those all-important questions to help every contractor know exactly where they stand when it comes to umbrella company fees.
If you’ve made the decision to contract through an umbrella company in 2021, you will next need to find an umbrella company that’s right for you.
After all, there are lots of umbrella companies out there, so how do you know which one to choose?
To help you find the best umbrella company for you, in this guide Umbrella Supermarket outlines what makes a good umbrella company, so you can rest assured you’re making the right move.
One of the many advantages to operating through an umbrella company for contractors is that they become an employee of their chosen provider.
In turn, this means that the contractor will be automatically enrolled onto the umbrella company’s workplace pension scheme.
To help contractors find out more about umbrella company pensions Umbrella Supermarket has put together this handy guide.
If you are considering contracting through an umbrella company you will naturally have questions and queries over how they work.
After all, making the move to umbrella can be a big step for contractors. To help, in this guide Umbrella Supermarket explains how to get started with an umbrella company and share our top tips for using one in 2021.
PAYE or umbrella is a question asked by every contractor. Which one you opt for will have a big impact on your contracting career and lifestyle. So, it's important to make the right decision for you.
To help makes things a little bit easier, Umbrella Supermarket has put together this guide on PAYE or umbrella, outlining the key differences between each, to help you make the best and most informed decision for you.
One of the many benefits to working through an umbrella company is that you will receive holiday pay as well as a range of other statutory benefits including sick pay, maternity and paternity pay.
To find out more about umbrella company holiday pay, and how to calculate how much you will be entitled to, Umbrella Supermarket has put together this handy guide.
Contractors must make several decisions throughout their contracting careers. One big decision contractors have to make is how they will operate.
One way that contractors can work is through an umbrella company.
Umbrella companies have become an increasingly popular way to contract in the past few years, offering many benefits to the contractor. But, how do you know whether this option is right for you?
To help every contractor make the right decision for them, in this guide, Umbrella Supermarket explains when not to use an umbrella company.
There are tons of benefits to using an umbrella company, which is why they have become such a popular option for contractors in recent years.
After all, an umbrella company takes away the stress and hassle of operating through a limited company whilst offering contractors a range of advantages, such as statutory rights, paying them a salary, deducting correct tax levels and National Insurance, and taking care of tasks like expense processing and invoicing.
However, as more and more contractors opt to use the services of an umbrella company, more providers have started to claim that they are HMRC approved.
To bust the myths around HMRC approved umbrella companies and get straight to the facts, in today's guide Umbrella Supermarket look at whether HMRC approved umbrella companies really exist, so you know exactly where you stand.
If you're considering making the leap to contracting, you will understandably want to know how much you will have to pay in umbrella company costs. After all, this amount comes directly out of the contractor’s pocket, so it’s important to be clued up on how much you should expect to pay.
To help contractors, in this guide Umbrella Supermarket answer the all-important question of how umbrella companies cost in 2021.
