Contractors' Questions: Can I claim travel, office and hotel expenses?

Contractor’s Question: I need some guidance about contractor expenses, specifically those claimable as the director of a limited company, having recently set one up. My background – I’m a new IT contractor who owns a flat in Greece and rents a hotel room in the UK near my client for long stays. The contract is outside IR35 and is performed by my company, which is registered in the UK and trades nowhere else.

Would I be allowed by HM Revenue & Customs to claim the hotel costs and put them through my company as a business expense? Also, can the expenses include subsistence in the shape of super market receipts? Furthermore, in case in the future I rent an office in the UK, would this be allowable as an expense? Lastly, are the costs incurred in travelling from the hotel to the client’s site claimable?

Expert’s Answer:  As the company is registered in the UK and you’re actively working here in the UK, it is possible to claim back certain expenses. When staying away from home while working, you are able to claim money back on the cost of travelling to and from the hotel and to and from your working-site from the hotel. This could be in the form of train tickets or vehicle mileage.

You can also claim expenses against the cost of the hotel itself, and breakfast or lunch. This is calculated on the basis that you are working eight hours a day, so make sure you’re keeping track of your hours. Additionally, you are entitled to claim for an evening meal, which can also include one alcoholic beverage.

While working away, there are many hidden costs that people forget about. For example, your bathroom at home might be stocked up with all of the toiletries that you need, but you’ll need to buy extra supplies if you are staying in a hotel for a week. This sounds like a minor expense, but over the course of a year, small costs can mount up. You are able to claim for £5 per night as an un-receipted incidental allowance, which covers items such as toiletries. This does however depend on how long you have been working at the site, as the 24-month rule will need to be taken into consideration.

With regards to renting an office in the UK, this would be claimable provided it is to be used solely for business purposes. There’s obviously a lot to remember, and it can take a while before a contractor is fully up to speed on exactly what they are entitled to claim expenses against, which is why it makes sense for people trading on their own to use a professional accountant. Such an adviser can be especially helpful if you are just starting out on your own, or you have moved from another country and are not familiar with the UK’s tax laws.

The expert was Michael Hough, director at Quantic UK, a specialist in freelancer and contractor accounting.

Editor’s Note: Further Reading –

Relocation expenses your contractor company can claim

Contractors’ Questions: How to claim for kit bought before my ‘Ltd’ began?

Expenses without the scandal: what's tax deductible for IT contractors

Monday 13th October 2014