Business Expenses – What You Can and Can’t Claim as a Limited Company

As part of the business planning service that we offer at Hysons, we often get asked about types of business expenses that limited companies can claim for. Companies can reduce taxable profits when managed efficiently, resulting in lower liabilities. This also ensures compliance with the latest tax regulations and strengthens financial planning. Despite the benefits, many business owners are losing money due to unclaimed expenses they are eligible for.

Keep reading to learn exactly what you can and can’t claim for as a limited company.

What Business Expenses Are Allowed for Limited Companies?

The nature of a business will impact the expenses incurred, hence why the government offers a long list of eligible items. Each has its own remit for what information must be provided as evidence, along with the amounts companies can claim. To summarise, the below list of expenses are allowed for limited companies:

• Bank Charges – This includes fees for using business bank accounts, interest payments and international transfer rates.
• Health Care Costs – This covers health checks, such as private cover and eye checks, for companies that rely on technology.
• Professional Membership Fees – Anything from subscriptions to industry
• Insurance Charges – If you must pay for any policies, such as liability cover, this can also be claimed back as long as it’s proven essential for the activities being carried out.
• Annual Entertainment Requirements – This includes £150 per person for staff party expenses and business entertainment if it’s spent as personal funds from a limited company director.
• Travel Expenses Incurred For Business Purposes – This covers any journeys such as employee travel to meetings. Furthermore, limited companies can also claim other travel costs, including road-use fees, parking costs and public transport tickets.
• Home Office Costs – Allowable for sole traders, if home spaces are used for limited company operations, a total of £6 per week can be claimed.
• Advertising Budgets – Companies can also claim back marketing and PR costs to a certain level.
• Office Materials and Incurred Costs – This category includes equipment and other fees such as Wi-Fi.

What Items Can Limited Companies Not Claim For?

Whilst we have shared the extensive list of what is allowed, there are considerations that limited companies must make for costs that are not covered by business expenses. Some of these may offer a grey area, such as entertainment fees, which is why it’s always a good idea to chat through your costs with a registered accountant.

Below is a list of items you cannot claim as a limited company:

• Entertaining clients cannot be expensed as a purpose of winning business. This is also the case for gifts with a ceiling allowance of £50.
• Legal fees, such as lawyer costs, cannot be expensed. Under the same umbrella, any fines are also disallowed.
• Donations not made with Gift Aid are also not covered, which is why this checkbox is essential.
• Limited companies can also not claim back income paid as dividends as this is classed differently from salaries.

How Are Tax Deductible Expenses Claimed?

Tax deductible expenses can be claimed via the annual tax calculations process which is why maintaining good bookkeeping and accounting records is essential. By claiming back eligible expenses, companies can offset their tax bills to benefit from more efficient payments and better profit margins.

To learn more about the process of claiming business expenses as a limited company, contact our team.