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Contractors: It pays to set up a limited company

by 1st Contact | Nov 26, 2013
  • You’ll come across claimable and reimbursable expenses on your journey through business. Here’s why it pays to set up a limited company and get the most bang for your buck.
    Accounting

    Contractors often struggle to reclaim their business expenses. After all, an expense can be anything from filling up your petrol tank to treating a client to lunch. Setting up a limited company lets you claim back on these overheads, as long as you prove that they’ve been accrued for business purposes.

    Claimable expenses

    There are two types of business expenses: Claimable expenses and reimbursable expenses. Contracting through a limited company reduces your taxable earnings and corporation tax by allowing you to claim some business expenses, while also reimbursing you for expenses that you’ve had to pay personally.

    Expenses that you can claim back:

    • Travel: Tube, train and bus tickets can be claimed back.
    • Cabs: As long as your trip is for business purposes, you can claim back on your taxi fares if you travel between 10pm and 6:30am (this can’t become a frequent expense though).
    • Cars: You can claim back on “business miles” only if you own the car yourself and keep an updated log book. At present, you can claim 45p per mile for the first 10 000 miles and 25p per mile after that within any given tax year (6 April- 5 April). You can also claim back on the costs of car hire and fuel if you’re renting a car.
    • Meals: You can claim back on lunch, as long as you’re working away from the address that the business is registered at. You can also claim back on breakfasts and dinners, as long as it’s within reason (that means no crocodile tail fillet stakes for late-morning brunch!).
    • Accommodation: You can claim back on your business accommodation as long as your business trip takes you no more than two hours from your registered office address.
    • Training: You can reclaim training costs only if your studies are essential to your professional duties (this doesn’t include personal development training).
    • Rent: The rent you claim must be relative to the amount of office space you use. For example, if you use 50% of your apartment as office space, you can claim back 50% of your rent as an expense.
    • Internet: You can’t claim line rental unless the contract is in your business name. If you use the Internet for business and personal use, you can claim back a reasonable percentage, like 20%.
    • Telephones: You can claim back business calls on your line rental if the limited company provides you with a land line and the contract is in their name.
    • Mobile phones: You can only claim business calls. If your limited company provides you with a mobile phone and the contract is in their name, you can claim back on these costs.

    1st Contact Accounting gives forward-thinking individuals the tools to steer their business affairs forward. If you’re interested in setting up a limited company with us, call 0808 141 1643 (free call within the UK) or email us.

    We are a professional services company that specialises in cross-border financial and immigration advice and solutions.

    Our teams in the UK, South Africa and Australia can ensure that when you decide to move overseas, invest offshore or expand your business internationally, you’ll do so with the backing of experienced local experts.

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