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Contractor Expenses

As a limited company contractor there are various business expenses you may incur. So what expenses can and cannot be claimed through your limited company?

According to HMRC, a business expense refers to costs which are incurred wholly, exclusively and necessary for your business. Therefore you should record all business expenses incurred so that you may see the true of cost of running your limited company.

As well as logging all business expenditure, and noting the contract and business activity that the expenditure relates to, you should also retain all receipts to cross-reference with your business expenditure log. Always ensuring that your claim satisfies the “wholly, exclusively and necessary” test.

You should be particularly wary of ‘duality of purpose’ - an expense that has both a business and a personal component, for example a business trip abroad which you enhance with some sightseeing. If there is any suspicion that the expense might not have been incurred if it were not for the personal benefit, it may be disallowed.

Typical contractor business expenses include your company formation, accountancy fees, business travel and accommodation, postage and stationery for business, training where directly related to your business, business telephone calls, and equipment purchased for business purposes.

Check out the guides below for more information on what expenses you are and aren’t allowed to claim through your limited company.

Checklist of allowable IT contractor expenses.

Umbrella's checklist of the most popular 'wholly, exclusively and necessary' expenses.

Meal allowances are a valid expense for contractors – when it is a travel expense. To be allowable a meal allowance has to be an expense of travel.

Charging expenses back to the client is common, but there are important ground rules that have to be followed if you wish to avoid falling foul of VAT regulations.

If you are a contractor working through your own limited company and are outside IR35 then life is very simple.

For IT contractors operating their own limited company, understanding the intricacies of tax-deductible expenses can mean the difference between just getting by and real profitability.

Former taxman Bob Jones explains how the time is calculated with regards to contractor expenses.

Downloadable chart to keep track of your contractor business when it’s on the road.

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