The issue of what constitutes an expense, and what doesn’t, can be a minefield for any freelancer to negate. The following is a selective list of what expenses you can claim if you’re a freelancer working with limited company status.
Freelancers and contractors who wish to travel the healthier way to work can claim bicycle expenses. In 1999 the ‘Cycle to Work Scheme’ was introduced as part of the sustainable carbon reduction policy. This makes it cheaper for freelancers and contractors to go green!
Contractors and freelancers can claim expenses on their Broadband Internet. In order for expenses to fall within the “wholly and necessarily” rules the internet contract must be addressed and invoiced to the company. If the Internet is in a personal name, only the business usage may be apportioned as an expense.
Contractors and freelancers can claim childcare vouchers through a Limited Company under the Government childcare voucher scheme. Through the Childcare Voucher Scheme employees are able to receive up to £55 per week (£243 per month) in childcare vouchers. These are exempt from tax and National Insurance Contributions, and are available to each parent and legal guardian.
For contractors and freelancers entertainment expenses are usually disallowed. However in some circumstances Input VAT may be reclaimed.
In order to claim entertainment expenses a distinction must be made between personal and business entertainment. Personal entertainment is not deductible. Business entertainment must not be provided to an employee of the business and must have been free of charge to the recipient. This can include food and drink and theatre or concert tickets.
Contractors and freelancers who work from home are entitled to claim home-working expenses. There are several different options through which contractors and freelancers can reimburse home expenditure – and this depends on the structure of their company and the specific nature of their home working arrangements.
Contractors and Freelancers can save tax by claiming tax-free mileage allowance payments for the costs of their business journeys made in their own vehicle, under the Approved Mileage Allowance Payments Scheme.
Subsistence expenses are business travel expenses such as meals. If subsistence expenses are incurred while traveling on allowable business journeys, employers are able to make subsistence payments tax and NIC free.
Freelancers and contractors can claim expenses on travel costs. HMRC states that deduction is allowed for the full cost of travel where necessary attendance is required.