A guide to claiming expenses
Not sure how you should categorise your business and personal expenses? This article may help.
This article lists all of the expense categories in FreeAgent and guidance about how they should be used.
Important: the following information should only be used as a rough guide to categorizing expenses. You should always get professional accounting advice if you're in any questions or doubts.
Accommodation may include stays in hotels, bed and breakfast, guest houses and rented accommodation.
- Advertising and Promotion
The cost of promoting your business such as advertisements, websites, networking club memberships, and directory listings.
- Auto Expenses
‘Normal’ (such as maintenance, wear and tear) expenses on cars that are an asset on the balance sheet are deductible.
Where expenses have been incurred that were unnecessary, for example, having alloy wheels fitted for aesthetic reasons, then this is not claimable. These ‘unnecessary’ expenses would be deemed as a benefit in kind for the employee.
- Bank/Finance Charges
Bank charges on company accounts are claimable.
- Books and Journals
Trade magazines, periodicals and books relevant to the business are allowable.
- Business Entertaining
Expenses that are considered to be business entertainment
- Provision of food and drink
- Provision of accommodation
- Theatre and concert tickets
- Sporting events and facilities
- Entrance to clubs and nightclubs
- Use of capital assets such as aircrafts and yachts for entertaining
- Cell Phone
If the invoice for the cell phone is in the name of the business then it is a deductible expense, even where there has been a ‘reasonable' amount of personal calls made.
- Charitable Donations
A gift of money made by a business to a charity may be claimed as an expense.
- Computer Hardware
Cheap computer hardware, such as a keyboard or a mouse, can be claimed as an expense, but a new desktop or laptop should be filed as a capital expense.
- Computer Software
Software is an allowable expense
- Employee Benefits
Insurances that are for business purposes may be claimed. There are many policies available.
- Interest Payable
Interest Charges on Company Credit Cards and Bank Accounts is treated as an expense to the company.
- Internet & Telephone
If the invoice is made to the business, then often the whole expense is deductible.
If a only a proportion of usage is attributable to business then a suitable proportion of the expense may be allowable.
- Leasing Payments
- Legal and Professional Fees
Legal costs incurred for solely business purposes.
- Licenses and Permits
Subsistence expenses are those paid for lunches and evening meals. There are often certain conditions that have to be met to make them allowable expenses.
Miscellaneous is a category used to describe anything that won't fit easily into another category. It should be be sparingly as it's preferable to categorise expenses into one of the other recognised categories.
- Office Costs
If the business rents an office then the costs, and associated costs incurred in making the rental, may be claimed.
- Office Equipment
Cheaper office equipment may be claimed as an example
- Other Computer Costs
Repairs, maintenance, support contracts and upgrades can be treated as an expense.
- Pension/Retirement Plan
Company paid pension contributions for the benefit of an employee or director.
Printing of letterheads, brochures, business cards and proposals can all be accounted for as expenses.
- Staff Entertaining
Including costs of Christmas parties or other staff events.
- Staff Training
Training courses that are relevant to the business are allowable. If a person who is in the business of IT consultancy has undertaken a course in plumbing, then the expense is not allowable.
If that person did become a plumber and started a new business or changed the current business’ trading category to that of a plumber, then the cost of the plumbing course may be allowable as a set up expense.
Includes general office supplies such paper for printing, pens, envelopes etc
Fees paid to professional corporations relevant to the trade of the business organisation.
Travel expenses may include:
- Gas (in total where the company has a company car)
- Public transport
- Motorcycle mileage
- Bicycle mileage
- Air fares
- Use Of Home
Where a worker uses part of their home for business, a proportion of the house cost based on the space used for the business and the hours it is used for business.
- Web Hosting
Web Hosting expenses are allowable if they are for the exclusive use of a business website
Cost of Sales
- Commission Paid
Commission payable to a person or company who had assisted in the finding of a contract for a company.
- Cost of Sales
Any purchases made in order for a sale to have happened, such as an item that is resold.
Materials purchased for the business
- Subcontractor Costs
The costs of another parties contribution to the sale
- Purchase of Capital Asset
A capital expense is an item purchased for the business that has a ‘useful life’ longer than the time at the point of supply. The expense of a telephone call is ended at the end of the call, but the expense of a computer is actually spent over the useful lifetime of the computer.
This guide was put together with the help of BFCA Limited Chartered Accountants and Tax Advisers.