Go-getter

Expenses

Examples of dis-allowable expenses:

Payments made for non-business work.
Non-business or private use proportion of expenses e.g. new phone, fax, computer hardware or other equipment costs –
Own wages and drawings, pension payments or NIC contributions.
Cost of goods or materials bought for private use -
Depreciation of equipment, cars etc.
Legal costs of buying property and large items of equipment
Costs of settling tax disputes and fines for breaking the law
Loses on sales of assets (minus any profits on sales)
Non-business motoring costs and private use proportion
Cost of buying vehicles
Travel costs between home and business
Fines
Costs of any non-business part of premises, costs of buying business premises
Repairs of non-business parts of premises or equipment
Costs of improving or altering premises and equipment
Entertaining clients, suppliers and customers, hospitality at events
Repayment of the loans or overdrafts, or finance arrangements
Debts not included in turnover
Debts relating to fixed assets
General bad debts
Payments to clubs, charities, political parties etc.
Non-business part of any expenses
Cost of ordinary clothing

Examples of allowable expenses:

Rent for business premises
Light, heat, power
Business and water rates
Property insurance, security
Use of home as office – business proportion only
Phone and fax running costs
Postage, stationery and printing
Small office equipment costs
Computer software
Repairs and maintenance of business premises and equipment
Renewal of small tools and items of equipment
Salaries, wages, bonuses, pensions, benefits for staff or employees
Agency fees
Total payments made to subcontractors in the construction industry – before taking off any deductions
Bank interest, interest on business loans, alternative finance payments
Bank overdraft and credit card charges
Hire purchase interest and leasing payments, alternative finance payments
Car and van insurance, repairs, servicing, fuel, parking, hire charges
Vehicle license fees
Motoring organization membership
Train, bus, air and taxi fares
Hotel room costs and meals on overnight business trips
Cost of goods bought for re-sale
Cost of raw materials used
Direct costs of producing goods sold
Adjustment for opening and closing stock and work in progress
Commission payable, discount given
Advertising in newspapers, directories etc.
Mail-shots, website costs
Accountant's , solicitor's, surveyor's, architect's and other professional fees
Professional indemnity insurance premiums
Amounts included in turnover but unpaid and written off because they will not be recovered.
Trade and professional journals and subscriptions
Other sundry business running expenses

Home as office expenses

If you work from home and use part of your house as an office you can claim back in your accounts the % of space that your office takes in your house of all the associated costs such as utility costs (gas, electricity, water etc) and mortgage or rental payment. When calculating the % be absolutely sure that the amount is reasonable.

In practice – when clients don't have the necessary underlying bills – it is usually acceptable to claim a flat weekly amount provided this is reasonable. If the claim is going to be higher than £250 per annum (according to HM Revenue and Customs) it is important to retain original bills or evidence of amounts paid and the basis on which the proportion has been calculated.

There are no hard and fast rules, and what is 'reasonable' would be influenced by:

the size of your property (a bigger property would tend to justify higher amount for home as office expenses) and
the number of other people living in the property (if it is shared by a number of people, the percentage of expenses attributable to your use of the premises would be lower).

Use of a motor vehicle for work

mileage allowance

A self-employed person, who uses their car partly for business purposes, can claim a fixed mileage allowance for all business mileage travelled.

The current maximum rates are:

car + van 40p (per mile up to 10,000 miles per year)

car + van 25p (per mile for each mile over 10,000 miles per year)

motorcycle 24p (per year)

bicycle 20p (per year)

Ideally you should keep a note of all business journeys, so that you can demonstrate evidence of number of miles which you have claimed in each tax year. In the absence of a log, one may sometimes estimate the business mileage by taking the annual mileage of the vehicle (e.g. from MOT certificates) and applying a percentage of estimated business use.

Example

If the car does 10,000 miles per annum and you can demonstrate (perhaps over a sample period of 3 or 4 weeks) that 30% of the use is for business purposes, then you may claim 3,000 (10,000 x 30%) miles @ 40p per mile = £1,200 for the use of the car.

A mileage allowance cannot be claimed by those whose business income (before expenses) exceed the VAT threshold (£68,000 in 2009/10).

You can only use the mileage rate basis if you apply it consistently from year to year. You can only change to or from an 'actual' basis when a vehicle is replaced.

You also cannot claim the allowance for private journeys, such as travel from home to work, or for journeys that serve both a business and a private purpose.

The mileage rate covers the costs of running and maintaining the vehicle, such as fuel, oil, servicing, repairs, insurance, vehicle excise duty and MOT. The rate also covers depreciation of the vehicle. So if a taxpayer uses the mileage rate basis then they cannot claim any additional amounts for these expenses.

The mileage rate does not cover costs that are specific to a particular journey such as tolls, congestion charges and parking fees. These will be allowable as a deduction where they are incurred solely for business purposes.

The taxpayer can claim the business proportion of the interest on a loan used to purchase the vehicle or the finance element of hire purchase or finance lease.

Find out more: http://www.hmrc.gov.uk/index.htm

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