Other Expenses

To find out whether you'd be better of using the simplified expenses method, you can use HMRC's handy calculator here.

Other expenses

So what other expenses can you claim as a partner?

Motor expenses - calculated

Rather than charging the simplified motor expense as shown here, you could charge the business a proportion of your actual running costs (fuel, maintenance, servicing, repairs etc) based on the amount of business mileage you do each year.

So let's look at an example:

You have total running costs of £5,000, total mileage of 10,000 miles and 5,000 business miles. You can charge your business £2,500 (£5,000 * 50%).

You can also claim a proportion of the purchase price of the car via capital allowances - but, again, you would need to reduce this claim by the private element of your car usage.

For most self-employed business owners, using the flat rate method is going to be far easier but it's worth doing the calculations when you first buy your car to make sure you're not losing out.

But be aware, once you've chosen a method you will have to continue with that method until you change your car.

Working from home - calculated

Rather than claiming the flat rate for working from home mentioned above, you can calculate the costs associated with working from home and charge your business that amount instead.

So what do you need to be aware of?  Well, we recommend you take the following steps:

  1. Work out what the actual annual running costs of your home are - you can include mortgage interest (or rent), maintenance, gas, electricity, council tax, service charges, cleaning and insurance.
  2. Identify what proportion of these costs relate to the area of your home you use for business - a simple way to do this is to count the number of rooms in your home (excluding kitchen and bathroom) and then identify how many rooms you use for business and what proportion of the time you use them for business.

    Let's take an example - assume you have 5 rooms in your home (excluding bathrooms and kitchen) and you use 1 of them 50% of the time for business - so the calculation is 1/5*50% = 10%.
  3. Apply the percentage you calculated in step 2 to the costs you calculated in step 1.  So if your total costs a year are £20,000 then you can claim up to 10% of these costs ie £2,000.

You can download our template to calculate these costs here.

A couple of things to be aware of:

  • From a personal tax perspective you will be receiving rental income - but as long as the costs of this are equal to the income there will be no taxable profit and so no tax to pay
  • Don't use any room in your house 100% of the time for business as this could lead to capital gains tax problems!
  • Double check the amount you are charging with local market rents for similar office space and usage - this will ensure you are not significantly overcharging your business

And what's the benefit of doing this?

Well, you'll save tax on the rental charge equal to your marginal rate of tax.

Mobile phone

If you're trading as a partnership, you basically have two choices for each partners phone costs:

  1. You can have two phones with one exclusively for work.  You can then claim all the costs relating to the work phone through the partnership (including claiming the VAT element against your VAT bill if you're VAT registered and not on the VAT flat rate scheme). 

    Whilst it might be the simplest method, we've rarely seen a business owner do this in practice - the main reason being that this doubles the cost of having a mobile phone!
  2. Have one phone and work out a reasonable split of the bills (and VAT if you're VAT registered and not on the flat rate scheme) between business and personal.  You can do this whether you pay for individual calls or have an all-inclusive contract.

    If your call usage is fairly regular then you can work out this split over a period of, say, 3 months.  Go through your calls line by line and highlight your business calls (or personal calls if you've got less of these!).  Then calculate the business calls vs the total calls. 

    Apply this percentage to your total mobile phone costs - including line rental and VAT.

    This won't be 100% accurate each month but as long as your calculations are reasonable (and you can show these to the taxman should the need arise), you shouldn't have any problems.

    If your call usage fluctuates massively each month then you may need to do this on a monthly basis.  Again, you don't need to be 100% accurate but your calculations should be reasonable and you should be able to show these to the taxman if he asks.

    You can also take the same approach for any landline you use for business or if you use your home internet for business.

Accountancy fees

Any accountancy fees you incur for preparing your partnership accounts are an allowable business expense.

However any fees incurred in preparing your personal tax return in general are not allowable.

In practice this generally means that your total accountancy fees will be allowable as an expense as the argument would be that the incidental cost of preparing your personal tax return would be minimal.

Training

Where you undertake training to keep your current skills updated, or because it is required to maintain membership of a professional body, then any such training will be allowable.

However if you undertake training to acquire a new skill then this will not be allowable.  HMRC's view (supported by case law) is that acquiring a new skill enables you carry out your trade, for example a doctor can't claim the cost of a degree  course required to become a doctor although they can claim for 'continuing professional development'

Clothing and uniform

You are allowed to claim uniform costs (and might be able to claim for clothing if it has your 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! 

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