Expenses for limited company directors: a complete guide! (Part 2)
Posted on 26th September 2019 at 19:02
Last week, we looked at some of the expenses a limited company director can claim. There was just too much to fit into one post, so here's part 2! Don't forget that you can download our free and exhaustive guide to limited company expenses by clicking here.
As a limited company, there are certain types of insurance that you should most definitely purchase. Even though they might initially seem expensive, they will cover your company in the case of theft, injury claims, financial loss, etc. Some types of insurance can also be claimed on for full tax relief. These are:
Contents Insurance - essential if you rent/own business premises that you want to protect.
Professional Indemnity Insurance - this will cover the business if there are any claims of financial loss.
Public Liability Insurance - this type of insurance will cover the business if there are any claims made against it - for example, an injury that has occurred due to a product fault.
Employer’s Liability Insurance - this type of insurance is required by law and will protect the business if any claims are made by the employees themselves.
It's not just liabiliy insurances you need to look into either. If you don't already have life insurance, it could be something to look into, especially if you have a family and you want the extra peace of mind. It is also a tax-deductible expense if the life insurance follows these conditions:
It doesn’t have a surrender value.
It only pays out to either an individual or a charity.
The policy pays a lump sum if the director dies in service before they are 75.
It is life cover only.
Private medical insurance
If your limited company makes a substantial contribution towards private medical insurance for both employees and directors (and it’s more than one check a year), it will automatically be categorised as a benefit in kind – resulting in the business having to pay for NI (National Insurance). You should also note that some types of medical treatment can be made tax-deductible if they aren’t considered as an employee benefit. An example of such is the treatment for repetitive strain injury for those who frequently use computers in their role.
Travel and accommodation
Before we get into what travel and accommodation expenses you can claim on, it’s important to know that tax relief can only be claimed on costs that are incurred when you are travelling to a temporary workplace – usually up to two years.
Vehicle expenses (including fuel)
When looking into these expenses, it’s essential to remember that there are different rules that depend on whether you use your own car or a company-owned car.
When you are driving your own car to the office or to a meeting, you can claim for tax relief. It’s important as a director to always be aware of the current rates so that the costs are deducted correctly.
Cars and vans - passenger payments
HMRC also allows for people that are carrying employees in their car/van to work to claim back for 5p per passenger per mile. It’s important to know that there’s no relief if you receive less than the 5p or nothing from them.
Company owned vehicles
The business will be able to apply for tax relief if a car is purchased directly through the business. However, as a director/employee you will have to pay tax for benefiting from the private use of the car. The tax will be calculated depending on the price of the car, the transmission type, fuel type, etc. Therefore, it is more efficient in terms of tax to simply claim on the mileage. If you need to purchase a van for commercial use, the cost of the fuel, vehicle, maintenance, etc. are tax-deductible.
Rail travel and flights
HMRC won’t consider the cost of rail/air travel as a taxable benefit when the company pays for them. This is, however, only applicable when:
The employee is travelling to see a client
You/ your staff are travelling to a temporary workplace
When you or your staff need hotel accommodation, you will be able to pay for the cost of it without it being considered by the HMRC as a taxable benefit. However, this is only in the following circumstances:
You are attending a business meeting
You are staying in a hotel after working in a temporary workplace
You were travelling for business
Other fees associated with business travel
Tolls/car Parking - the business can pay for these costs, applying for tax relief afterwards
Speeding and parking fines - these costs can’t be claimed on, whether you are travelling for business or to work
Food: whilst you or your employees are travelling, the business can cover the cost of food
As the director of your limited company, your salary will be considered as an allowable expense - National Insurance contributions are also considered - and you can choose how much the business pays you (as long as it aligns with the IR35 legislation). We can recommend what the most tax-efficient option is for your business.
You can also claim on this type of salary as an allowable expense.
These types of expenses are also considered tax-deductible for limited companies:
Childcare costs (some limitations might occur)
Clothing and laundry (only applicable for limited companies that require protective uniform)
Gifts for employees (dependent on the nature of the gift)
Entertainment (client entertainment is not included): it must be an event that’s not only held annually but open to every employee and it can’t exceed a cost £150 per guest.
Pensions - the business can claim up to 100% tax relief on the contributions it makes on their pension scheme for employees and directors.
Postage and stationary
Technology and computer equipment (the amount of tax relief will be dependent on the use and the quality of it)
Telephone and broadband (limitations apply, enquire with HMRC or your accountant to see exactly what costs are tax-deductible)
Employee training and professional development, as long as it is relevant to their role, with the aim being to improve current skills
If you have any other queries regarding expenses that you can get as a limited company director, we are here to help. Just get in contact with us today - book a call here, or drop us an email. We'd love to speak with you!
Don't forget to download our free and exhaustive guide to limited company expenses by clicking here.
Nicola J Sorrell -
Founder | Xero Champion | IR35 Expert
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