What Contractor Expenses Can't I Claim?

Being self-employed has many advantages compared to working as a permanent worker. Becoming your own boss means that you have the freedom and flexibility that most people dream of and the financial benefits are pretty impressive too!

Being able to claim for your contractor expenses is one of these financial benefits and the higher you expenses, the lower your tax bill. This is because when you make a claim for any expenses that you have made, you will only get taxed for your profits, with the amount spent on your business remaining tax free.

However, some people can find expenses a bit confusing when it comes to what you can or cannot claim for…

What Can I Claim?

In order to claim back your contractor expenses they must be a cost that was made for the running of your business; HM Revenue and Customs rules state that expenses can be claimed providing they are wholly and exclusively for the purposes of your business.

For example:

• Accountancy fees
• Contributions to an Executive pension plan
• Employers NI contributions
• Company bank charges and interest
• Any business travel
• The cost of work equipment
• Advertising
• Business telephone calls
• Business ‘entertainment’
• Computer software
• The rent, heating and lighting of your business premises
• Stationary and postage for work
• Books and magazines that are relevant to your business.

If, however, your contract is caught by IR35 then you can only claim for:

• Administration expenses which are fixed at 5% of your contract income
• Travel and accommodation expenses
• Pension contributions
• Certain professional subscriptions

It is vital that you keep hold of any receipts for the expenses you wish to claim. When you complete your tax return at the end of the year, you will need to declare all your income and expenses.

So What Can’t I Claim?

• Training courses not specific to your trade
• The cost of a degree
• Private school fees
• Clothing – unless it is a specific type of work uniform, such as a lab coat.
• Meal allowance – unless you are working at a remote site away from your normal place of work, or when staying away from home overnight, but daily, round sum claims for meals are not permitted.
• Parking fines or speeding tickets
• Certain accommodation costs – the cost of hotel or bed and breakfast can be claimed as an expense, however, the cost must be deemed to be ‘reasonable’
• Anything you don’t have a receipt for.

If you are found to be claiming expenses that are not for the running of your business, then you could see yourself being investigated by HM Revenue and Customs and asked to provide evidence.

If you have any question regarding expenses, then it’s always best to seek professional advice from a contractor accountant. You can then have the reassurance that you are being given the best possible advice when it comes to your finances.