What you can claim as an expense
There are plenty of expenses you can claim to reduce your tax bill if you run your own business. This means that a proper tax planning and execution will help you to get benefits and optimise taxes in a legal way.
Claiming for mobile phones
If you are an employer and provide your employees with only one mobile phone or SIM card and the contract is between you and the supplier, then you don’t have to pay tax and National Insurance or report to HM Revenue and Customs (HMRC) even if some of the calls are personal calls.
If you provide more than one phone then first phone is tax free, but others count as asset and you must report to HMRC and pay National Insurance on the value of benefit.
Business trips and holidays
You don’t need to report business travel expenses to HMRC if either of the following applies:
- Paying a flat rate to your employee as part of their earnings – this must be either a benchmark rate or a special (‘bespoke’) rate approved by HMRC
- Paying back the employee’s actual costs
Holidaying while on business trip: You can claim all the costs through the company If you are on a business trip and decide to do some leisure activities without incurring extra costs.
Extending Business trip: You can still claim majority of the costs through the company even when you decide to add extra days to do some sightseeing, as long as the main purpose of the trip is business. You would need to keep proper records, notes and other evidence to document the primary reason of the trip. You can’t claim the additional costs of staying extra days and you would have to pay it back to the company.
You cannot claim any costs through the company if the purpose of the trip is personal even if you decide to do some business while you are away.
Company cars and fuel
There are certain National Insurance and reporting obligations if you are providing your employees with company car. You have to pay and report if:
- Cars are used for private journeys (including from home to office)
- Fuel used for private journeys
- Cars adapted for employee with disability
You must keep all the records of your employee’s expenses and benefits.
You should keep record of cars list value to be able to calculate the value of the benefit.
There are also some exceptions when you don’t need to report and pay, that includes:
- Cars that are owned by directors or employees
- Cars that are only used for business purposes (e.g. Employee traveling to business meeting)
- Employees paying for the fuel they use for private journeys
School fees and private lessons
As a director of a limited company you are treated as an employee for tax purposes and company can provide you and your employees with certain benefits. These benefits can include school fees, private lessons (e.g. tennis lessons) and other fees.
To be able to claim those benefits and pay only National Insurance, it is important that the contract is between company and the service provider (school or lesson provider) and the company pays the costs.
Company must keep records of all benefits and expenses it provides to employees. Records need to show that you have reported accurately and your end-of-year forms are correct.
What you should keep:
- The date and details of every expense or benefit provided
- Information necessary to work out amounts you put on end-of-year forms
- Any payment employee contributes to an expense or benefit
All records must be kept for at least 3 years after end of the tax year they relate to.
You must also tell your employees to keep evidence of their expenses, e.g. receipts or bills.
Should you have any questions, please contact our specialists or call us on +44 (0)203 490 41 21.