Expenses - what do you need to know?

Every business incurs a multitude of expenses. You want to remain as tax-efficient as possible and if you’re registered for VAT, you also want to be aware of what VAT you can reclaim on expenses.

Limited Company Expenses - The Fundamental Rules

When it comes to claiming business expenses for your limited company, here’s a few rules you should follow:

1. You can only claim for the expenses you incur wholly and exclusively during the everyday running of your business. For example, a tennis coaching business is likely to spend on tennis racquets for its business, whereas that would be difficult to justify for a plumbing business.
2. If an expense has mixed use between business and personal, you can only claim expenses which relate to business use.  For example, a mobile phone which has 50% business use and 50% personal use; only 50% of the expenditure is allowable as a business expense.
3. If you decide to extend a business trip abroad for leisure purposes, you can only claim for the business days, not the additional leisure days.
4. You can also claim back some expenses if your office is at home, but not everything. Typically you can reclaim £6 per week as the most prudent case. If you have a rental agreement in place with the property owner for the property, this may count as a business expense, but it is possible that this will have implications for your CGT on any home sale down the line, and your mortgage, insurance or planning permission may not allow such rental agreements.