Contractors can improve their returns by ensuring that they maximise the expenses they claim from their company. Allowable expenses range from travel and meals, to telephone and computer costs, to a portion of household bills when working from home, with much in-between.
In order to claim expenses, they must be wholly and exclusively incurred in the course of business. As far as possible, evidence should be retained of the cost, such as a till receipt, a bank statement transaction or oyster card records.
Sometimes it is not practical or possible to obtain or retain such evidence, and it is unlikely that reasonable, modest expenses, where a good reason for no documentation is given, would be disputed by HMRC in the event of an investigation.
A recent case, Bianchi v HMRC, arose where HMRC disputed the validity of the expense claims, and no evidence was able to be produced due to renovations at the taxpayer’s home. The taxpayer appealed, but a First-Tier Tribunal found that the inability to prove they were valid expenses meant that they were discounted.
This is a reminder for contractors to retain receipts or documentation where possible, and ensure that they are claiming for valid deductions.
** PRIZE GIVEAWAY **
As receipts can get lost pretty easily, it’s a good idea to have a receipt tin to store them in so we’re giving this receipt tin away for free!
To be entered, all you have to do join our LinkedIn Group and tell us why you like being a contractor in the comments.
This may then be used in future marketing materials talking about the benefits of contracting, but please be assured that we’ll only reveal your first name, initial of surname, job title and the industry you’re in. The closing date for this competition is 5th August, so get your entries in now!
Article written by Sam Price, ACA IIT(DIP) MAAT, and Miranda Blake, BSc Hons from ICS. Sam is a Chartered Accountant and tax adviser who specialises in helping our contractors prosper. He achieves this through a proactive and bespoke approach to each client.