Reimbursed expenses are business-related expenses that are allowable, tax free, to directors. They are based on current tax legislation and specific regulations. HMRC has to be satisfied that the expense is allowable for tax purposes; otherwise the reimbursement is treated as additional taxable income.
Most of the expenses incurred as a director of your own limited company are likely to be paid from your company bank account. They will be classified as business expenses where allowable. Your employer, your limited company, reimburses work expenses incurred by yourself. Equipment, entertaining and stationery, along with some others expenses are considered below. Business Travel Expenses and Worksite Travel Costs are worth looking at individually as there are many aspects involved.
Generally, capital items are those items that will have enduring benefit to your limited company. Examples are computers, tools, office furniture and motor vehicles.
If the items purchased are owned by the business, capital allowances will be claimed rather than the full cost being an allowable expense in the year of purchase. The capital allowance rate (or annual investment allowance) for plant/equipment is 100% of the value of the asset in the year of purchase up to a ceiling of £200,000 for expenditure incurred after 1st January 2016. The capital allowance rate for motor vehicles will be dependent on the CO2 emissions of the vehicle.
If the capital item has been purchased on Hire Purchase or it is leased, then the interest/lease payments can be claimed as a revenue expense.
Reimbursement of the upkeep, repair and replacement of tools and equipment is allowable where these items are used wholly for work. There should be no element of personal use of tools or equipment and they must not be capital expenditure fixed assets belonging the company. Whether or not a particular tool or piece of equipment is classed as work related and therefore allowable will depend on the particular circumstances of each assignment.
Meals or events involving more than one person held with third parties such as clients or customers are described as business entertainment. In general terms, the provision of third party entertaining does not usually attract a tax charge for you as the director where it’s incurred necessarily in the performance of your duties. Business entertaining includes events such as dinner, theatre trips, sports events, etc. Claims in relation to entertaining expenses must be supported by a valid receipt together with a list of those being entertained, the organisation they represent and the reason for the entertaining. Your limited company will not be able to claim tax relief for business entertaining costs for Corporation Tax purposes.
The cost of stationery, postage, sending and receiving faxes, printing, photocopying and phone calls, etc., is an allowable business expense provided that these are necessarily incurred in the performance of your duties and documentary proof is made available. Allowable costs may include telephone calls and faxes sent from home and call costs on a mobile phone owned by you as a director. If the mobile phone is owned by the limited company and the cost is claimed as a business expense, no benefit in kind will arise in relation to its use.
If a director has a personal contract for the phone the rules are different and benefit in kind may arise in relation to its use.
The cost of submitting weekly hours and expense claims by email, fax or post is allowable.
The cost of Broadband access made available for your business use via the limited company will not be a benefit in kind if the sole purpose is to enable you to work from home and any private use is not significant. You should be wary of claiming for Broadband costs where the line is in your own name as this may incur a further tax charge.
You may claim the annual subscriptions paid to certain approved professional bodies or societies where their activities are relevant to the type of work undertaken by you.
A claim may also be made for certain statutory fee where paying them is a pre-condition of being able to undertake your work. A list of approved institutions is published on the HMRC website
The cost of work-related training courses is allowable as long as it includes any training course or other activity designed to impart, instil, improve or reinforce any knowledge, skills or personal qualities which are likely to prove useful or better qualify you to perform your role. The training must be paid for directly by the company or reimbursed to you from your company to qualify for tax relief.
The cost of the upkeep, repair and replacement of protective clothing and uniforms is allowable where your duties require such items to be worn.
Other expenses not specifically included in any of the other captions may be allowable depending on individual circumstances, and subject to them being incurred for business purposes.
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