Darren Fell, managing director of Crunch Accounting, discusses what costs be claimed on as a small business.
As most people are aware, if you run a business you can claim expenses on some of your costs. This has been a great way to help out companies and give them a greater chance of success. Businesses pay tax on their profits, so when they claim expenses that amount is removed and therefore they pay tax on a much lower amount. If you’re diligent you can end up saving yourself a pretty large chunk of money. So, what can you can claim for?
The main contenders
We’ll start with ones you’ve probably already heard of. If you’re using a car for business purposes you can claim on the mileage you accrue. If you’re going by car or van you can claim 45p a mile for your first 10,000 miles and then 25p for each one after that. If you’re going by motorcycle it’s 24p a mile no matter how many you go. If you’re more environmentally inclined, you can actually claim for bike travel too at a rate of 20p a mile.
Another fairly well-known option is claiming for things like office equipment and consumables (things like printer ink) that are essential to the running of your company. If you run a limited company, there is a way to claim on some more equipment. For example, if you have a laptop, you can purchase it off yourself through the company. That will make it a company asset and therefore it’s cost as a claimable expense. On top of that, you’ll get money straight from the company personally tax free.
Rent and bills
If you happen to work from home, you can also claim on rent, mortgage and bills too by charging some of the costs through your company, although there are some limitations.
The amount of rent you can claim is all based on the space dedicated to actual business. For example, if you have an office you only use for business which takes up 10 per cent of the square footage of you flat, you can claim 10 per cent of your rent as expenses. If you work in a room for half the time and use it as a normal room the other half of the time, you’d only be able to claim 5 per cent of the rent back.
In regards to bills, they work in a similar way and need to be divided between those used when doing business and not. Obviously this is a bit more complicated to figure out, so it might be worth looking into a dedicated Internet and phone business account instead.
Another area to keep an eye out for is capital allowances. This includes things like machinery, gifts of equipment to charity and even fixtures. You can’t claim for the expenses on some of these things and so instead you must claim for a capital allowance. It can be quite a complicated area though.
There are plenty more things that you can claim expenses for and HMRC have a full list here.
If you do want to claim, obviously you’re going to need proof of these expenditures. Make sure you keep track of all your invoices, receipts and papers and store them somewhere safe. Keep them well ordered as well to save a lot of time in the future.
One final thing to keep in mind is that HMRC can come back and request proof of expenses up to six years after they’re claimed. So, if you’re thinking about chucking out your papers once HMRC have accepted your accounts, think again. If you’re unable to give proof when asked later on, you could be asked to pay the money back.
Further reading on business expenses
See also: Profit and loss template