Claiming Expenses

Claiming Rent From Your Company

By following the correct procedure, it's perfectly reasonable to claim rent (use of home) from your own limited company for working from home.

You can either charge your company £6 per week as a flat rate deduction for the 2024/25 tax year (£6 per week for 2023/24). Alternatively you can charge your company based on the actual costs incurred.

If you only work from home occasionally (for example, just to update FreeAgent or Xero or do a little company administration!), then we would recommend putting through a charge of £312. - if you are not charging based on actual costs, we will automatically put through a charge of £312 in the accounts unless you tell us otherwise!

If you decide to charge your company based on the actual costs incurred, just a few things to bear in mind:

• You shouldn't make a profit from the agreement - if you use this workbook to calculate the rent this shouldn't be a problem (and make sure you don't use any room 100% for business - otherwise you could end up with a capital gains charge!)
• Any rent paid to you by the company should be a fair market rent - it can be less than you would pay for a third party office but it shouldn't be more - and the rent should be reasonable in terms of the work you do from home (if you work a lot at other premises, HMRC may question a large use of home charge)
• You should have a licence agreement in place between yourself and the company setting out the terms of the rental agreement - you can download a template here
• You should document the company's agreement to the licence agreement using a board minute - you can download a sample board minute here

We recommend you do this retrospectively at the end of the year so that you are working with actual expenses.

Because if you do this at the beginning of the year, you may need to adjust the final rental figure in line with your actual expenses.

It's also acceptable to claim rent even if your business base is abroad.  However you'll need to ensure that any expenses are converted at a reasonable exchange rate.  We would recommend you convert any expenses monthly using HMRC's recommended rates here - if the rates are for the wrong year simply change the year in the address bar for the webpage.

If you're renting, then theoretically, charging 100% for a rental property shouldn’t cause an issue but this isn’t something that we would recommend as it could difficult to justify 100% business use should HMRC ever challenge this!

A percentage of any external decorating or maintenance could also be included if it affected the whole house including the office but nothing should usually be included for garden landscaping or maintenance unless there is compelling evidence to justify such a claim eg you have an outside workspace and have clients visiting your office. We recommend a cautious approach be taken when calculating your use of home as office charge!

Business mileage

If you use your own car for business you can charge the company for the business mileage you incur and this is a tax deductible expense for your company.

To make life easier, you can use fixed mileage rates to calculate your business travel costs rather than having to keep detailed records of all the expenditure incurred. Subject to certain limits (see below) your company can pay you a mileage allowance tax free.

The rates are currently (April 2024) as follows:

If the mileage allowance paid is above the approved rates you will be taxed on the excess.

The rates are supposed to cover your fixed and variable running costs, for example petrol, maintenance, road tax, insurance and depreciation on the cost of your vehicle. (Don’t blame us if the current rates are woefully insufficient!)

If you're using FreeAgent, you can see how to claim back mileage here.

If you're using Xero you can see more about using reimbursing yourself in Section 17 of the Xero bookkeeping topic here.

You can also download a mileage workbook here.

Please note that if you have an HMRC enquiry then HMRC will expect to see detailed mileage records.  If you can't provide these then HMRC may disallow the mileage claim.  There are apps you can download to record your mileage going forward.

And if you are claiming VAT on mileage (FreeAgent does this automatically for you), then make sure you keep enough petrol receipts to cover any VAT claimed.

Other expenses

Make sure you reimburse yourself monthly for any business expenses you pay personally (and of course for use of home and your business mileage).

This is important for two reasons - firstly you will get a corporation tax deduction for these expenses and secondly it is a good way of extracting money from your company effectively tax free.

If you're using FreeAgent, you can see how to claim back expenses here.

If you're using Xero you can see more about using expense claims, or paying supplier invoices personally, in Section 17 of the Xero bookkeeping topic here.

However we would recommend that you try to use your business bank account to pay expenses wherever possible and keep those expenses you pay personally to a minimum.  Also you need to ensure that you have good records for any expenses paid personally and have a VAT receipt for any expenses where you are claiming VAT.

Mobile phone

Your company is able to provide staff and directors with one smartphone each. Provided the contract is in the company's name, and there is some element of business use, then the phone can be used for both business and personal calls without resulting in a taxable benefit in kind charge on the employee.

The company can also claim back the VAT against its VAT bill (unless it's using the VAT flat rate scheme).

So what happens if your mobile phone is in your personal name?

Well, you can ask your phone provider to transfer the contract into your company's name (get permission to do this if you're just an employee!) or take out a new contract in the company's name. The downside of this is that the phone providers often charge more for contracts with businesses than they do for contracts with individuals. However the tax savings may more than justify the increased costs.

So what if you don't want to transfer the phone into the company's name?

Well, if you pay for your calls separately then you can charge the company for any of these calls which were business related - including charging the VAT element.

But beware, if you're on an all-inclusive contract, then you can't charge the company with your calls as there is no cost to you! So in this case it may well be more tax efficient to take out a new contract in the company's name.

Internet

The situation with the internet is similar to the rules for mobile phones.

If the bill is not in the company's name, and you can show that the internet costs were only used for the business, you may be entitled to a deduction. However, where an Internet package provides unlimited access and no separate billing procedures to separate business use from private use, it is not possible to identify any specific part of the cost as relating to business use. Consequently the position for these packages is the same as for similar mobile phone packages.

Where the bill isn't in the company's name, we would suggest adding this to the use of home workbook created to charge the company rent.

Clothing & Uniform

The company can claim uniform costs (and might be able to claim for clothing if it has the business logo on it) as well as any protective clothing required for your business.

However you can't claim for everyday clothing - even if you only buy a suit to wear to business meetings!

Training

Training costs can be provided to an employee or director of a limited company and will be an allowable expense for corporation tax purposes, with no benefit in kind impact on the employee provided that the training concerned is a course or other activity designed to impart, instil, improve or reinforce any knowledge, skills or personal qualities which:

• are likely to prove useful to the employee when performing the duties of the employment; or
• will better qualify the employee to perform those duties.

If you're intending to spend a large amount on training, make sure you are able to demonstrate the value to the business of this training.