Contractors' Questions: Can I claim set-up or relocation costs?

Contractor’s Question: As a British citizen, I’m in the process of moving back to the UK from Canada, as I recently landed a new freelance IT contract – it’s a 12-month rolling contract with the option (later on) to go permanent.  

What, if anything, can I claim to help support the new contract, which I’ll execute via my new limited company? I doubt I can claim for shipping expenses (which were hefty), but what about other costs, such as rental agreements or other set-up costs? My full-time job in Toronto was with a different outfit (and industry) to the freelance gig I’m taking in London.

Expert’s Answer: You’re in luck thanks to what HM Revenue & Customs categorises as pre-trading expenses or set-up costs. So yes you can claim certain expenses, which are related to company formation, as below:

  • Fees paid to accountants  (and lawyers) for incorporating the company and preparing of contracts.
  • Costs related to travel and subsistence which are incurred during the course of setting up business.
  • Equipment expenses, such as computers, office furniture, office consumables and other admin costs.
  • Marketing and research costs, including website designing, domain hosting, business cards and advertising.
  • Home as office costs (to a reasonable extent), telephone and broadband internet access.
  • Insurances, such as public/employee liability and professional indemnity insurance.

Having said that, you would not be able to claim relocation expenses regarding travel and transport, as the prime condition is that if a director/employee of a company is moving home/office due to relocation of an existing business. In your case, you are coming back to the UK to set up a new limited company and thus ‘relocation’ expenses cannot be claimed.

For your future reference, the reason for relocation must be one of the following:

  • A new job

A change of job/place of employment. The new place of employment must be significantly far away from your current residence to make relocation necessary.

  • Change of Duties

Duties must have changed from you being transferred to another department or branch, which means you must travel a greater distance to your place of work.

  • Change of Location

The place where you carry out your duties has moved, which means that you must travel a greater distance to your place of work.

The expert was Sumit Agarwal, managing director of contractor accountancy firm DNS Associates.

Editor's Note: Related Reading -

Contractors' Questions: How to recover start-up costs?

Relocation expenses that your contractor company can claim

Contractors' Questions: How to cut tax and other costs when setting up?

Monday 9th February 2015