As a security cleared IT contractor you’ll incur a number of expenses for the purposes of running your business. The total of these expenses can be offset against your overall tax liability.
Working through a limited company is the most tax efficient way of trading. Limited companies are able to claim for a wider range of expenses than standard self-employed sole traders and this guide will breakdown what an expense is in the eyes of HMRC and we’ll also provide you with a few examples.
What is a valid expense?
Unfortunately you can’t just place any old expense through your limited company. The general rule of the thumb is that a valid expensive needs to be wholly, exclusively and necessary for your operations as a security cleared IT contractor. Consequently you won’t be able to put that new surround sound TV system through the books.
Transport will probably be one of your main expenditures, especially if you are required to travel regularly for work.
Transport expenses work in a few different ways.
If you are driving you can claim 45p per mile for the first 10,000 miles you travel in a year and 25p thereafter. Although what you might not already be aware of is that you can claim 20p per mile cycled, so if you feel like getting some exercise and cycling to your next meeting you can reduce your overall tax liability at the same time.
You’ll also be able to claim back the cost of public transport tickets like trains and busses.
It’s expected that your client might ask you to work at a different site for a period of time or you might have a business meeting in a location that means you can’t do it all in a day.
In situations such as this you’ll need a hotel or B&B to rest your head. The good news is that accommodation for business purposes can be claimed as an expense.
However there is one rule that you need to be aware of. HMRC states that the cost needs to be reasonable. Therefore if you are staying overnight in Blackburn for business a comfortable hotel is enough, HMRC would argue that you didn’t need to book an expensive 5 star hotel – just remember to keep those costs reasonable.
If you want to join professional bodies like The Chartered Institute for IT, there will be a cost. These memberships can often be invaluable as a method of both developing your skills and contact list, so it’s money well spent.
HMRC understands the value of such memberships and as a result you’ll be able to claim the full cost as long as them membership is relevant to IT. Therefore, if you fancy trying your hand at hairdressing and joining a hairdressing institute, you unfortunately won’t be able to claim it as an expense.
As a contractor in any industry it is likely that you’ll need some form of insurance. Whether it’s public liability, professional indemnity or something else, as long as your insurance is for business purposes you will be able to claim the full cost as an expense and offset it against your overall tax liability.
A common expense for contractors in any field, not just IT, is equipment. Whether you need certain tools to carry out your job or a laptop to check emails, write plans etc. you’ll be able to claim them as a full business expense. The rule is that as long as the equipment is wholly, exclusively and necessary for the running of your business, they will be considered a valid business expense.
To find out more about our all-inclusive, fixed-fee service call our friendly accountants on 01242 504510 or 0207 096 2659.
Why Integro Accounting?
Integro Accounting is the UK’s only specialist provider of fixed fee, limited company accountancy services for contractors, consultants and freelancers that was established to an award winning standard – our Practice Manager, Maria Hickmott FCCA, won The British Accountancy Awards’ ‘Accountant of the Year’ in 2011.
We were set up with the vision of providing a service that is the ultimate for the dynamic, busy professional of today in a language you understand.
Integro Accounting have designed a bespoke service for the contractor who is always on the go; never forgetting that one size will never fit all.
The relationship you have with your accountant is the most important factor in our service which is why we will always offer unlimited contact with your own personal accountant; whether that contact is via the phone, email or face to face.
We have our 3 offices located in London, the South-West and on the Bedfordshire and Buckinghamshire border. There are also meeting locations in many of the major cities and towns across the Home counties, South-West and South Wales, all conveniently placed so that you never have to travel far to meet your accountant.
If you have any questions about contracting or would like to find out more about how Integro Accounting can help you and business please call Christian on 01525 303984, email firstname.lastname@example.org or request a callback.