The Price of Ignorance: Expenses You May Be Claiming Wrong
Bright Ideas is well-versed in saving money for contractors and freelancers new to the game, yet it’s a sad truth that even veteran business owners can get expense claims muddled when HMRC comes calling.
Tax exemption is such a broad church of analysis that mistakes are understandably made from time to time, especially as your business grows and encompasses more variables. We thought we’d cut the fact from the fiction surrounding business expenses, so join us for a run through of claims that can be undone by the small print:
The daily commute
As tempting as it is to claim back the cost of travel, going to and from the office falls nowhere within HMRC’s leeway for tax relief (unless it is a temporary workplace). It is your duty to get to a place of work with the funds you’ve acquired from said work station, just like employees. So whilst you can claim back on a meeting with a new client, journeys to your co-working space might raise suspicion with the taxman.
That said as a contractor your workplace is likely to be temporary, be sure to assess whether you fall within the 24 month rule when claiming for the daily commute.
HMRC enforces an all-inclusive policy for work-related social occasions – meaning you have to invite everyone on your client list, not just some – and it has to be an annual event, or become one. The cost per person also has to be less than £150 if you want tax relief for food, drink, entertainment and accommodation.
Although these rules generally apply to office parties and the like, they’re worth keeping in mind if you’re a freelancer eager to celebrate a milestone or take your clients out for a Christmas meal.
Travelling between meetings, and preparing for disruptions like a train strike or cancelled bus service, means that many self-employed professionals need a car to get around. The government recognises a company vehicle as an acceptable claim against running costs, but you have to meet certain criteria. For example, the car must not reside on your property, and can only be used by one person.
Medical treatment & insurance
As you may have read in one of our previous posts, tax exemption for work-related uniforms is very specific. The same philosophy applies to medical claims i.e. they must be relevant to the work at hand. If you’re a hairdresser, say, you might reasonably want to insure your hands from injury, as they’re intrinsic to your service. Likewise, a freelancer who sits at a computer all day would be able to claim for an eye test, but not contact lenses, as they could be considered a cosmetic affectation. Use common sense to identify risks that reasonably match up to the realities of your job.
The many strands of agreeable business expenditure can seem like wandering through a tangled forest, poked every now and then by a passing tree. However, there’s no need to be confused by the ins and outs of claim requests if you have a solid accounting service by your side.
It’s our job to help you succeed, so call 0161 669 4221 or email Info@biaccountancy.com today to speak to one of our professionals.
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