Limited company travel expenses – what you can and can’t claim

‘Leave it to me, I’ll put this on expenses!’ 

‘My accountant claims for everything’

“It’s okay, I’ll put it on the business”

These must be the top 3 most uttered claims of all time when it comes to business expenses… And often heard at a post work meeting, near a bar… Sound familiar???

… After all, who doesn’t want to maximise their tax reliefs and allowances!

Truth is, the rules are quite strict when it comes to what is allowed as a fair and reasonable business expense. If you want the lowdown on this… Read on…

Limited company expenses – what’s the deal?

You can only put expenses through your business if they are WHOLLY, EXCLUSIVELY and NECESSARILY incurred. This means the expense must relate to the business and business-related activities and hasn’t been classed as disallowable by HMRC.

We know, it’s a more stringent test than you would think. But still, there is an upside…

The list of expenses that you CAN offset against your corporation tax bill is substantial, providing lots of opportunities for you to make a claim. Some are more obvious than others but fear not, we have produced a handy guide for you – look here, it might be a surprise to see what you can claim.

The list below is an overview of the most common tax-deductible expenses that are likely to crop up in your business on a day-to-day basis.

  • Business travel and accommodation
  • IT costs and software
  • Mobiles, telephones and broadband
  • Postage and stationery
  • Insurance
  • Accountancy fees (of course, worth every single penny 😊)
  • Rent or use of your home as an office

Most of the expenses above will be paid directly from the company bank account. When claiming back expenses which you paid personally, they can be reimbursed to you by your business.

Good news; you can offset these expenses against your corporation tax bill, but take care, as some expenses can fall into a grey area which may affect the amount of personal tax you have to pay.

When in doubt, get in touch with us for advice.

Is it for business, or is it for pleasure?

This is a classic “grey” area… Let’s illustrate what we mean by example…

Say you had a meeting with a client or supplier in sunny Rome. Clearly the meeting is ENTIRELY business related so you would expect to be able to claim this as a travel expense… Perfect 😊
… But, what if that meeting was on a Friday and you decided to book an extra day to see the sites, eat the gelato and sample the limoncello? Now, the entire trip would be classed as disallowable for tax purposes because of the personal element.

This is a regular query, and can seem unfair, but rules are rules.

Travelling to work – regularly in the top 3 of the query list!

Let’s talk mileage… What’s the rule?

“You cannot claim for mileage incurred to and from your permanent place of work.”

If you drive a private vehicle for business, that’s an allowable expense and you can claim 45p per mile for the first 10,000 miles travelled in a tax year and then 25p per mile for anything above. You can also make similar claims for business travel by motorbike [24p] or cycle [20p – there is an excuse to get fit!].

This can get a bit confusing for subcontractors who could spend several months working at the same address without it being their permanent place of work.

It can also be confusing for employees that have more than one permanent place of work.

The ’24-month rule’… That’s another one to note… What’s that?

Say you are a contractor, you can claim travel and subsistence expenses for travelling to work, but only if the contract isn’t longer than 24 months. So, if you’re starting a contracted job you need to know the length of the contract before you start. If it’s under 24 months, you can claim the travel expenses… Happy days; anything over 24 months and your travel will fail to qualify for the entirety of the job.

The area of travel is a tricky business, this just gives you a flavour of the parameters!

Want to save money and keep life simple…

As a limited company it is key to know the rules and playing by the rules… That’s what we are here for… We identify what you CAN’T claim, know what you CAN claim and we make sure all allowances and reliefs are offset against your tax bill each year.

If you’d like to have a chat about your business expenses or invite us to Rome (we love gelato, all expenses paid), just get in touch.

Here’s the link to our handy guide for your perusal.

Remember, a guide is just a guide and is no substitute for professional advice. The tax rules are also subject to regular change and review so do not rely on the information given.

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