A quick Google search will provide you with a whole plethora of detailed information around the rules and regulations of business expenses. However, we know that sometimes, official documents can seem confusing and often feel quite overwhelming.
In order to make things simpler and easily digestible for you, we’ve summarised some of the most important points to ensure you remain compliant with the dos and don’ts when dealing with your company expenses.
Knowing what qualifies as a business expense and what doesn’t
As a general rule, it helps to remember that a business expense is only ever really valid if it covers something that the employee needs to do their job. Once you’ve made this analysis yourself, you’ll then need to consult the criteria that HMRC have set out to outline what they deem to be a qualifying expense.
Understand the difference between private and business expenses
As with most things, a number of grey areas can often arise to complicate things and this might be the case when trying to define what is a company expense and what is a private expense.
For example, as a self-employed sole trader or very small business, you might find you conduct a fair amount of your operations from home. If so, you’ll likely be using the private telephone line and internet connection you have to make business calls.
What you’ll need to do here is be able to itemise your phone bill in order to claim back the work-related portion and clearly separate it from personal usage which will fall under the umbrella of private expenditure. It’s only on expenses which are deemed wholly for business that tax deduction can be claimed.
Be aware of any qualifying exemptions
There are some expenses which don’t actually need to be reported to HMRC in your end-of-year reports if you have applied for exemption. These usually come under the category of routine expenses and typically include things like business travel, entertainment, uniform and tools.
In order to be applicable for exemption, you must be either paying a flat rate to your employee as part of their earnings which has been approved by HMRC, or paying back the employee’s actual costs.
Enlist the help of a qualified accountant who can take the pressure of crossing the Ts and dotting the Is off your shoulders and ensure you’re paying the right amount of tax and National Insurance.
A trained professional has the skillset and the industry knowledge to ensure that your accounts are within the legal requirements and that the expenses process is being carried out correctly. As we mentioned above, HMRC sets out some stringent criteria around this so employing the expertise of a financial expert is something we would definitely recommend.
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We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!