Expenses Question!

JimSims · 05-10-2009, 01:46 PM

Hi expert accountants!,

I'm a creative contractor with my own Limited Company (I've had my company for about 3 years). My new accountants are advising me that, as long as I keep receipts, I can claim for things like travel to and from my place of work, CAD & photoshop courses related to what I do, entry into creative conferences / workshops etc

I have never done this before as my old accountants didn't mention anything about being able to claim expenses etc. I am also on the flat rate VAT scheme and I was under the impression that as such one of the disadvantages of the flat rate scheme is that I cannot claim expenses. So, who is right?

Cheers for your help, I'd appreciate your thoughts

Jim

Malvolio · 05-10-2009, 03:31 PM

YouCo can pay for any expenses it likes. The only question is, does that money, when paid over to you personally, represent a Benefit in Kind to you: if it does, then you pay tax on it just like it was normal income. (In other words, if it's not a business expense, you must pay for personal costs out of taxed income.)

The test for a business expense is "Did I spend this money wholly and exclusively in the course of my work?" If you did, then it's a business expense, YourCo picks up the bill and the cost comes off your profit calculation. Travelling to do a job for someone is clearly a business cost, as is lunch while you're there and as is a hotel bill if you get stuck overnight. However, if you stay overnight so you can go visit some friends or something while you're there, then it's not wholly and exclusively for business purposes and is not claimable.

VAT, FRS or not, is neither here nor there. But be aware that if you incur expenses that you can charge to your client, they are part of your service and you should add VAT to the total amount.

Your old accountant sounds like he's in the wrong job. Speak to your new one and get the full story: there are around 60 things you can legitimately claim as business expenses and some of the dividing lines, like training, are a bit blurry.

(BTW, just commented on this point on my blog. I'll be doing a more detilaed version sometime soon. Plug plug...

The SMG · 06-10-2009, 09:21 AM

agree with Malvolio. Flat rate vat has nothing to do with whether or not you can claim back expenses through your LTD. However, if you do have large input vat expenses (or expenses that incur vat) you may not be necessarily better off using FRV. Check the difference between the VAT you collect from your client(s) and the flat rate vat % you pay over to Hector. If this difference is LESS THAN the vat you're regularly paying on expenses then you're probably better off accounting for vat in the normal way (output vat charged to clients less input vat incurred on business expenses).

HTH

G

Howzat · 06-10-2009, 02:52 PM

I read this on Phil Richards blog last week. It may come in handy...

60 Expenses you can claim through your company

60 Expenses you can claim through your company | Accountants

H

Malvolio · 06-10-2009, 04:16 PM

Quote:

Originally Posted by Howzat

I read this on Phil Richards blog last week. It may come in handy...

60 Expenses you can claim through your company

60 Expenses you can claim through your company | Accountants

H

Beat me to it! However, remember the Golden Rule. You have to spend it to claim it.

The SMG · 07-10-2009, 10:02 AM

Quote:

Originally Posted by Howzat

I read this on Phil Richards blog last week. It may come in handy...

60 Expenses you can claim through your company

60 Expenses you can claim through your company | Accountants

H

Nice list Howzat (or should I say Phil!). There's a couple on there that even I didn't know about. I've just forwarded the link to a few of my contractor buddies who are always asking about this kind of thing (I guess that's why the article was so popular).

G

WhiteBear101 · 07-10-2009, 01:35 PM

Hi,

I'm not sure if this is relevant to the thread but I was wondering if training is usually an allowable expense for tax purposes?

I plan to futher my education with a series of programming classes after work. I've added up the total costs which comes to about £1,500.

What do you think, could I put this through my umbrella company?

Thanks
WB

Malvolio · 07-10-2009, 01:45 PM

Quote:

Originally Posted by WhiteBear101

Hi,

I'm not sure if this is relevant to the thread but I was wondering if training is usually an allowable expense for tax purposes?

I plan to futher my education with a series of programming classes after work. I've added up the total costs which comes to about £1,500.

What do you think, could I put this through my umbrella company?

Thanks
WB

Quick answer is no. You can only claim training that is directly applicable to the job you are currently doing. Retraining or reskilling is not allowable against tax.

But ask your brolly anyway. That's what you pay them for...

WhiteBear101 · 07-10-2009, 01:52 PM

Hi Malvolio,

Thanks for the advice. I'm currently working as a project manager (not in the IT field) so I guess the programming courses aren't relevant to my current job and would probably go down as re-training.

The reason I ask the forum is that it's nice to know chapter and verse before phoning my umbrella company. Based on some of the stories I've read, i'm keen to adopt a belt and braces approach to my tax position, not just rely on what one person or company tells me.

Thanks again
Wayne