As the old adage goes, you have to spend money to make money. Company expenses are a fact of life, but with some common sense and basic accounting skills, you can keep your books balanced and your cash flow positive. Tracking your expenses is an important step you can take to keep your corporation tax payments low and your business organised.
What are company expenses?
Company expenses are what your spend on the products and services you need to operate your business. Expenses are also used to calculate your company’s profit – to do this, you simply subtract your allowable expenses from your revenue. The lower your profit calculation, the less corporation tax you need to pay – so you’ll want to claim every expense that you’re eligible to. In short, having control over your expenses can save your company money.
What counts as an allowable expense for a limited company?
If you’re a limited company in the UK, the guidance around what is a “necessary” expense can be confusing, with many of the rules based on loose concepts and can seem unclear. Remember, always consult with your accountant if you’re not entirely sure if something counts as a business expense. However, there are some categories of company expenses that are generally safe bets:
You can claim mileage, fuel, parking, food, and accommodation (within reason) for business trips and travel. Money spent on you and your team commuting to the workplace, however, is not eligible.
- Staff entertainment
You can spend up to £150 per head annually on events open to all staff – this includes your Christmas party.
- Accounting services
So long as the accounting services are solely for your business, and not for your personal finances, they can be claimed.
You can expense gifts and other “trivial benefits” so long as they cost £50 or less to provide and are not cash or a cash voucher, aren’t performance based.
- Equipment, supplies, and raw materials
The broadest category, related to your type of business – this will typically include things like computers, notebooks, software, and paper, but can extend well beyond office supplies. If you need it to get the job done, it generally counts in this category. The main exception being
- Phone and internet service
As long as the service is solely used for business purposes, you can claim it. If you use a mobile phone for both work and personal use, you may struggle to claim it as a business expense.
- Salaries and pensions
Your salary, as an employee or director of your company, counts as an allowable expense. National Insurance Contributions are also allowable expenses. Up to a limit, you can also pay into your pension tax-free. Be sure to consult your accountant about this.
- Charitable donations
You’ll be able to catch a break on your corporation tax when you donate certain goods and services to charity, including: money, your products, equipment, and land.
- Professional subscriptions
So long as they are directly relevant to your business, professional subscriptions are allowable expenses.
You’re able to claim course fees, travel, and accommodation related to training that helps you build on your team’s existing skills, for example, sending your Head of Creative on a Design Thinking seminar. Claims may be rejected if they are perceived to be re-training or to gain new skills, ie, getting an additional degree.
Keep in mind, that if you’re a sole trader or self-employed, you’ll have a different set of rules to abide by.
How should I pay for company expenses?
You can pay company expenses in two ways; directly, or as reimbursed expenses. For many reasons, the best way to track and pay company expenses is to use a company card. Company cards are secure, easily accessible and trackable, and, as the account admin, you’ll have full visibility over all of your outgoings.
Manage your company expenses with Revolut Business
Company cards are available on all of our plans – for both companies and freelancers. Simply choose a plan with the right number of allocated team members; 2 on our Free plan, 10 on Grow, 30 on Scale, and as many as you like for Enterprise plans. Each team member can have as many company cards as they like.
End-to-end expense management
Our company cards help you to automate your expenses and capture receipts in the app instantly. We’ll even send your team helpful reminders to add expense details and receipts images, so you’ll never have to nag again. Then it’s up to your accountants and administrators to simply review expenses and reject or approve them – and even upload or import files to their accounting platform of choice.