Contractors’ Questions: Can I claim expenses for a credit card purchase?

Contractor’s Question: I have purchased an item costing slightly in excess of £1,500 by using my personal credit card, although I have a fully compliant VAT receipt under my company name. Will I be able to claim this amount as a company purchase/expense? The items I purchased are two servers for my home network to do my learning, training and testing.

I bought these items by credit card because there was an offer of ‘0% interest on purchase items over £250 until 2012.’  I purchased the company items using my own credit card rather than my company account because at the time there were insufficient funds in the company account. Please advise. 

Expert’s Answer:   In short, yes - your claim sounds as if it will qualify. HM Revenue & Customs accept that from time to time employees pay for items which are in fact liabilities of the company. Within the HMRC guidance manuals, note the quote:

"Businesses are often run in such a way that employees make payments on their employer's behalf. For example an employee may buy stamps for the employer and be paid from petty cash. This transaction is outside the scope of Section 62 and Section 72: the employee has received no money of his own on which we could make such a charge."

Imagine, to modify the Revenue’s example, if the director had paid cash from the company petty cash box - I assume that would not be a problem. What if there wasn't enough cash in the petty cash box, but he has the cash in his pocket? Would he have to physically take the cash out of his pocket, place it into the petty cash box and then take the box to the shop? In practice he pays for the item out of cash, and book entries are made to show capital introduced into the company from which the item is then purchased.

In your case, the director has paid for a company item via his own credit card but in doing so he has effectively introduced capital into the company in a manner similar to the cash scenario as above.

As a result, I see no problem from a personal tax, corporation tax or VAT perspective.

The expert was Bob, the retired tax inspector. 

Thursday 4th August 2011