Are you a veteran running an LLC or are you just starting out as a company manager? Either way, business expenses often go unreported, which means you may pay more taxes than you need to. Realizing your costs, regardless of size, is an important part of running a successful business. Calculating business expenses is an easy way to keep your business tax-efficient - it will reduce your profits, reducing your tax liabilities and payments. By reporting all of your eligible expenditures, you'll ensure that you don't pay a single penny in more tax than you need to.
The general rule is that business expenses should be "complete, exclusive, and necessary". However, we must bear in mind that HMRC's rules are trivial and complex and are usually based on vague notions such as “fairness” and “reasonable” about claimed costs. This can affect the amount of personal taxes you pay. We look at all the major types of HMRC-approved business costs that you can claim as a limited partnership. We also have a separate section that lists all the costs you can claim as a Sole Distributor.
If you need help with your limited partner accounts or want to claim your expenses, you can reach out to our expert advisors and find out how PTA can help your business.
What Is the Public Company Tax Exemption?
Business costs reduce the profit on which limited companies pay corporate tax. Therefore, more allowable cost means less taxable and less taxable profits to pay. Since you always want to stay safe from HMRC, you need to ensure that you only claim invoices that are on the HMRC-approved list. In order to calculate your expenses properly, you need to keep accurate records of everything. Please note that you are required by law to keep these records for at least six years.
As always, HMRC rules can be complex and are often based on concepts such as 'fairness' and 'fairness' in claimed costs. Always consult an accountant if in doubt.
Confirm Expenses as a Public Limited Company
You can pay for your business expenses directly from a commercial bank account or as a "debit" if you pay it in person. Remember to always keep accurate records every time you make any payments with company money. Your employees can also claim costs if you run a small limited liability company. So it is best to have the company account form and policies as the amount your employees are allowed to spend in each case. It's also important to note that in order to be able to pay the costs, your employees must keep all receipts.
How to Keep a Record of Your Limited Liability Company (LLC) Business Expenses
We encourage you to list and update all of your business miles throughout the year or to outsource this portion of your accounting to make the process easier. You must keep a record/receipt of all your business expenses. For example, if you are claiming an exemption from fuel tax while using a company-owned vehicle, be sure to keep all of your receipts. For other business expenses, tax relief is provided from the cost of everything needed to operate the LLC. The trick is to make sure you save everything carefully so you don't lose it. You are not limited to a certain quantity of supplies within a reasonable range.
The best way to use online accounting software is to track what you've done for supplies and other expenses like travel and living. The main difference is that you don't have to memorize every item. However, it is important to keep receipts for every purchase. Receipts must be kept for a period of six years after the returns have been submitted as HMRC may decide to investigate at any time during this period.
25 Business Expenses Can You Claim in Your Taxes as a Limited Company in the UK
1. Accounting Fees for Public Enterprises
You can claim a tax credit on the full cost of your company’s limited accounting costs, as long as the accountant’s time is only allocated to your company’s affairs. If an accountant gives advice or takes the time to manage your personal matters (such as preparing your personal self-assessment statement) it may be in the LLC account, but you will need to report it yourself.
2. Accommodation Costs and Expenses During the Business Trip
You can claim the cost of accommodation while traveling to work or a temporary location for business purposes, provided the cost is reasonable and not excessive. HMRC is likely to question unnecessary claims for expensive hotels or apartments with more than one bedroom.
3. The Cost and Expense of Starting Your Public Company
The cost of establishing an LLC is a business expense and you can claim a tax credit for this. This covers all associated costs, from printing to shipping the equipment your business needs. You can also claim the accounting fees you paid or the company’s mandatory training fees.
4. Business Insurance
You can avail of any insurance policy for your company. Business-related insurance premiums, such as public liability or professional indemnity insurance, can be claimed as an expense. Keep records of insurance policies and premium payments.
5. Business Mileage Costs
If you use a vehicle for business purposes, you can claim expenses related to its use, such as fuel, repairs, insurance, and vehicle tax. You can either use the flat rate mileage method or the actual expense method to claim these costs.
If you go to work temporarily in your car or truck and pay for the fuel yourself, you are entitled to compensation for your work. You can also claim a mileage fee while you ride the bike. No matter how you travel, you can’t travel a mile to get to your regular place of work.
6. Charitable Donations as a Limited Liability Company
Your public company pays lower corporate taxes when doing community service. You can claim a tax credit by deducting your subscription from all corporate profits before paying taxes indirectly. We explain this in more detail in our information in another section.
7. Childcare Costs and Expenses
HMRC does not allow child custody as a legitimate business expense. However, the employees themselves (including directors of limited companies) can claim tax relief with the payment of their salaries up to a certain amount.
8. Cost of Parties and Events through Your Limited Liability Company
Your company can hold an annual event - often a Christmas party - as a tax-free benefit, provided you meet certain conditions. Your staff can invite parties, but the cost cannot exceed £ 150 per person (including VAT). The main purpose of this is to serve the staff.
Expenses incurred for entertaining clients, suppliers, or customers can be claimed, but these costs are not deductible for corporation tax purposes. Make sure to keep records of all entertainment expenses, including receipts and the names of attendees.
With some exceptions, entertainment expenses or gifts are not allowed as a deduction from profits, even if that is the actual cost to your business or trade. Therefore, tax credits are not given for this.
9. Maintenance Costs
If you have personal maintenance costs, you may be able to claim the cost of your management duties. These costs are not recognized in corporate profit, so the net effect is as if those costs were not claimed at all.
10. Equipment & Furniture Costs for Your Limited Company
Payment for everything needed to perform your duties as a manager is tax–free like computers, printers, software, etc. For example, you will get a reasonable exemption for office equipment/furniture. B Chairs, shelves, etc. This seems to serve two purposes but is acceptable as it is a commercial necessity. As long as personal use is minimal, it will not be considered an asset and you will not have to pay personal taxes on it.
The cost of desks, chairs, and other office furniture can be deducted. You can either claim the full cost under the Annual Investment Allowance (AIA) or claim a writing-down allowance over several years. With more people working from home than ever before due to the coronavirus, we have a separate article with information on what to claim as a decent job from home costs.
11. Fixed Assets and Disposal of Fixed Assets
As long as it is intended for commercial use, items such as laptops, personal computers, work phones, and office furniture can be recorded as fixed assets in your business accounts. If the original is old or no longer used by your company, you can remove it. Whether you continue to use a fixed asset or sell or dispose of old models, HMRC needs to know if it is counting correctly every year.
While buying fixed assets is not a cost that degrades business profits, you can benefit from capital relief to reduce the amount of paying corporate tax.
12. General Office Expenses
Simple purchases must be made with receipts that will be used in full, exclusively, and to meet your obligations. This includes postage, computer supplies, and office supplies. Stationery, printer ink, and other office supplies can be claimed as business expenses. Keep a record of all purchases, as HM Revenue & Customs (HMRC) may require evidence to support your claims.
13. Fees for Cell Phones, Landlines, and Broadband Phones as A Public Company
If the landline contract is for commercial use only, then it is an approved business expense and you will not be personally taxed. Using a separate phone line dedicated to business only shows that this is 100% business use. For cell phones, the company can claim all costs as eligible costs, provided the contract is between the company and the cellular operator.
It is becoming increasingly difficult to separate the cost of business calls as cellular operators (and many landline operators) charge the cost of calls. If you can't separate the business component from your personal use of your cell phone, duplicate subject rules prevent you from filing a complaint as there is no charge for business calls you make, on top of the tariff you actually pay for employees.
Once you start doing some of your home business on your personal broadband, you will not be able to claim if you already have broadband unless you can clearly separate the business from the personal element. Having two broadband lines can show that one line is 100% business-friendly.
Phone and internet expenses directly related to your business can be claimed. For mobile phones, only the business portion of the bill can be claimed. If you work from home, you can claim a portion of your home internet costs based on your business usage.
14. Professional Subscriptions
Professional subscriptions such as membership in a trading organization or registrations required to trade are allowed as long as they are from professional organizations that are HMRC certified and relevant to your job. If it's not directly related, it's not allowed. Membership in your local golf club is not allowed, no matter how much you think it could help your business!
Costs of business-related software and subscription services, such as cloud storage or project management tools, can be deducted. Make sure to maintain receipts and records for these purchases.
15. Wages and Pensions
A salary paid to you as an employee or manager of your company, like any National Insurance Contribution (NIC), is a reimbursable expense. You can pay a tax-privileged salary up to the relevant threshold for national insurance, i. e. before becoming responsible for initiating payments to NICs. You will be more tax efficient if you pay a lower monthly salary as you will have to start paying the NIC once you cross the applicable NI threshold.
Salaries, wages, bonuses, pensions, and other benefits paid to employees can be claimed as business expenses. Ensure you maintain accurate payroll records and comply with all relevant tax and employment laws.
16. Use Your Home as an Office If You Are A Limited Company
If you work for an LLC, you can claim a weekly amount if you work from home. The amount you can claim from HMRC is £ 6 a week with no detailed records. The other good news is that HMRC does not think it is an in-kind advantage, which means that you do not have to pay tax on it thanks to your self-assessment.
As always, there are rules: You must be able to show that you spend regular time in this office space so that you can use your home office for more than simple management. On-site or in customer offices. Equipment essential and essential to your professional duties will benefit from tax credits. You can also request reasonable compensation for the cost of furnishing an office (such as chairs or bookcases).
17. Rent Out Your Office to Your Company
You may be able to rent out your personal workspace in your home to your limited company and claim it as an expense. You should mention this income during your self-assessment. Thus, you are subject to additional taxes once your expenses are deducted.
HMRC's rules are complex in this area and it expects any calculations to be "fair and reasonable". You should speak to a crisis accountant before entering into a lease agreement between you and your company. Rent paid for your office space can be claimed as a business expense. This includes any service charges or maintenance fees associated with the rented property. Ensure that you maintain proper records of rental agreements and payment receipts.
18. Work Uniforms or Protective Clothing
As we mentioned at the beginning of the article, you cannot claim a beautiful outfit or dress for personal use. However, if you need a uniform for your business, for example, a T-shirt or hoodie with your company name and logo, or if you need special protective clothing such as boots or steel toe, you can claim the costs. . If you are an actor or artist and need a costume, you can claim it too.
19. Utilities
Expenses for electricity, water, and gas can be claimed, provided they're used for business purposes. If you work from home, you can claim a proportion of your utility costs based on the area of your home used for work and the amount of time spent working there.
20. Business Travel
Costs associated with business travel, such as airfare, train tickets, or hotel stays, can be claimed as long as the travel is solely for business purposes. Keep records of travel itineraries, receipts, and any other relevant documentation.
21. Training & Development
Costs associated with employee training and professional development can be claimed, provided the training is directly related to the business. Keep records of course fees, materials, and any associated travel expenses.
22. Benefit in Kind
A Benefit in Kind (BIK) is a non-cash benefit provided by an employer to an employee, such as a company car or private health insurance. As a limited company in the UK, you must report any BIKs on your employees' P11D forms and pay Class 1A National Insurance contributions on the value of the BIK. Failure to do so can result in penalties and interest charges. Ensure you maintain accurate records of all BIKs provided to employees.
23. Legal Costs
Legal costs incurred by a limited company in the UK can be claimed as a business expense if they're related to the operation of the business, such as the costs of obtaining legal advice or representation in a legal dispute. Keep records of all legal invoices and payments, as HM Revenue & Customs (HMRC) may require evidence to support your claims. Note that legal costs related to the purchase or sale of a business are not tax-deductible.
24. Marketing Costs
Marketing costs incurred by a limited company in the UK can be claimed as a business expense if they're related to promoting the company's products or services, such as advertising, website development, and marketing materials. Keep records of all marketing expenses, including receipts and documentation of the marketing campaigns. You can claim the full amount of the marketing expenses in the accounting period in which they're incurred. However, note that costs related to entertaining clients or suppliers are not tax-deductible. Make sure to only claim marketing costs that are directly related to promoting your business and comply with all relevant tax laws.
25. Interest on Business Loans
As a limited company in the UK, interest paid on business loans can be claimed as a tax-deductible expense. To claim interest, ensure that the loan is taken out for business purposes and that the funds are used solely for the company's operations. Keep accurate records of all loan agreements, interest charges, and repayments made during the accounting period. Note that if a loan is secured against an asset, such as a property, interest may not be fully deductible. It's important to consult with a professional accountant or tax advisor to ensure that you are correctly claiming interest on business loans in your tax returns.
Which Expenses You cannot claim in Your Taxes as a Limited Company
While there are numerous business expenses that can be claimed as a limited company in the UK, it's equally important to understand which expenses cannot be claimed for tax purposes. This knowledge helps ensure compliance with the tax regulations and avoids any potential penalties. In this article, we will discuss several expenses that are generally not eligible for tax deductions.
Personal Expenses: Personal expenses incurred by directors or employees are not deductible. This includes costs such as personal clothing, groceries, housing, and general living expenses.
Fines and Penalties: Any fines or penalties imposed by regulatory bodies, such as late filing penalties or parking fines, cannot be claimed as tax-deductible expenses.
Non-Business Travel: Expenses related to non-business travel, such as personal vacations or holidays, are not eligible for tax deductions. Only costs directly related to business travel can be claimed, provided they meet the necessary criteria.
Capital Expenses: Capital expenses, which involve the acquisition or improvement of long-term assets, are not fully deductible in the year of purchase. Instead, they are subject to capital allowances, which allow for deductions over several years.
Entertainment Expenses: The costs associated with entertainment, such as meals, drinks, and event tickets, are generally not tax-deductible. However, there are exceptions for certain business-related entertaining, such as staff parties or events for the general public.
Charitable Donations: While charitable donations are commendable, they are not considered tax-deductible expenses for limited companies. However, they may be eligible for other tax reliefs or benefits, such as Gift Aid.
Depreciation: Although depreciation represents the wear and tear of assets over time, it is not an allowable expense for tax purposes. Instead, capital allowances are utilized to account for the reduction in the value of qualifying assets.
Private Use of Company Assets: If company assets, such as vehicles or equipment, are used for personal purposes by directors or employees, the portion used for personal use is not deductible as a business expense.
Interest on Personal Loans: If a director or shareholder loans money to the company, any interest charged on the loan is not tax-deductible.
Legal Costs for Acquiring or Selling a Business: Legal fees incurred during the purchase or sale of a business are generally not deductible as a business expense. However, they may be eligible for capital gains tax relief.
Political Donations: Contributions made to political parties or campaigns are not considered tax-deductible expenses for limited companies.
Costs of Business Incorporation: Expenses related to incorporating a business, such as company formation fees, are not deductible as they are considered capital expenses.
Non-Qualifying Training Expenses: While training and development costs for employees can be claimed as business expenses, expenses for non-qualifying courses, such as hobbies or personal interests, are not eligible for tax deductions.
Dependent Care Expenses: The costs of childcare or dependent care for employees are not tax-deductible expenses for limited companies.
Illegal Activities: Any expenses incurred in relation to illegal activities, including fines, bribes, or criminal defense costs, cannot be claimed as tax deductions.
It is crucial for limited companies to adhere to the tax regulations regarding deductible expenses to maintain compliance and avoid potential penalties. Consult with a professional accountant or tax advisor to ensure that you fully understand which expenses are eligible for tax deductions and to effectively manage your company's financial obligations.
If you are still unsure about anything or need guidance, please contact us in this regard.