In order to keep your company’s corporation tax to a minimum it is important to claim allowable business expenses as they will reduce the amount of profit liable for corporation tax.
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These expenses can be paid directly from the company or paid personally, then reimbursed by the company. The current rate of corporation tax is 20%.
These are some of the expenses which you may claim, if applicable and wholly and exclusively for the business. All receipts for business expenses must be retained and an accurate record of everything for a period of six years after their financial year end.
The annual salary amount will offer corporation tax relief. The best option is to take a minimum salary (below NI/TAX threshold).
An asset is something of value that is owned by your business such as computer equipment. You buy any asset for business purposes and you may be eligible to claim up to 100% of the cost back through the company.
Your limited company can contribute up to £40,000 to the pension fund to reduce your corporation tax. For example, if you contribute £5,000 into the pension pot, you will reduce your corporation tax by £1,000.
If you purchase a vehicle through the company, you are able to claim the VAT (if registered). The vehicle will offer corporation tax relief which will be influenced by the CO2 emission. If there is no personal use, there will be no benefit in kind. The mileage rate claimed will be reduced depending on the engine size.
The mileage rate covers the costs of running and maintaining the vehicle, such as fuel, oil, servicing, repairs, insurance, vehicle excise duty and MOT.
You can claim 45p for the first 10,000 business miles and then 25p in the tax year (6th April to 5th April). Please pay for fuel using your personal account.
Travel cards/car parking
Transport and parking costs relating to the business can be claimed.
Accommodation and subsistence
Accommodation – overnight stay
You can claim accommodation costs when away from normal place of business or you have moved from your permanent residence to somewhere closer to your job role.
If the accommodation is on a room only basis, that means you can claim the accommodation cost and claim for breakfast and evening meal on a receipt basis.
If the accommodation is inclusive of meals you cannot claim for the breakfast/evening rate.
Subsistence – daily rate
£5 can be claimed – if you are out of the house for a period of at least 5 hours (including travel) and the cost of a meal has been incurred.
£10 can be claimed – if you are out of the house for a period of at least 10 hours (including travel) and the cost of a meal has been incurred.
Please use your personal account to claim for subsistence. You will claim the £10/£5 depending on the level of hours you are out of the house.
Subsistence – breakfast and evening rate
The breakfast (£5) or evening rate (£15) are only applicable in rare occasions. If this is something expected in your role often, you will be unable to claim the rate.
If applicable and irregular to your usual working pattern – the breakfast rate (£5), two meal rate (£10) and evening meal rate (£15) will apply.
You may claim higher of £4/week of £18/month (without any receipts or invoices). Alternatively you can claim a proportion of the cost of electricity, utilities, home broadband, rent, etc. based on size of the home office.
Purchase a company phone or change your existing contract to your company name. If the contract is in your personal name – claim an appropriate portion of the contract cost e.g. 50% split relates to business
Insurances required by your company to conduct its duties such as Professional Indemnity, Employers liability and Public liability can be claimed for.
Post and office stationery
You can claim for any post, office stationery and printing that is related to your business or work.
You can claim up to £243 per month tax/NI free. You must ensure the childcare provider is registered or approved with Ofsted. There needs to be a letter in place to allow your limited company can purchase childcare directly from the registered provider. The childcare provider must also provide an invoice in the limited company’s name.
You can claim for eyesight tests providing it is necessary for the initial or continued use of visual display equipment in your duties. You are unable to claim for glasses as they offer a dual purpose and are not exclusively related to business use, unless they are prescribed during your time at work for visual display.
Annual health check
You qualify for one per a year and the invoice would need to be raised in the company name. Please also make the payment via the company account.
Other business expenses
This can be claimed on the basis that the service provided is to complete your company accounts. Therefore, the payment should be made via your company.
In order to claim for the cost of advertising or marketing, it would need to relate to your business.
Course/professional fees and subscriptions
These can be claimed as long as the skills and professional fees are relevant to the business. You can also claim for subscriptions for business magazines and books.
Charitable donations to a registered charity offer tax relief.
Entertainment is not an allowable expenses therefore it does not offer corporation tax relief. You can claim the cost of the entertainment but for the purpose of calculating your corporation tax the value will be added back.
If you are in any doubt over what you can and can’t claim through your limited company, ask your accountant.