Contractors and Freelancers

Our Services

We specialise in making accounting easy and simple for contractors and freelancers working in the UK, with our flexible service offering, tailored for your specific needs.

The software packages we use are specifically built for contractors to not only take the hassle out of the admin, but also to make sure contractors pay themselves as tax efficiently as possible.

All prices quoted are subject to VAT at the current rate

Bronze

£89.00 Per Month

  • BeanBalance accounting software
  • Tax planning

    Everyone's personal situation is unique, and for us it is of utmost importance to make sure that our clients pay themselves as tax efficiently as possible. We therefor take great care to ensure this, with our monthly paying clients.

  • Accounting services

    This includes advice and work on more complicated tax and accounting issues, e.g. buying, depreciating and writing off assets, issuing shares, directors loans, etc.

  • Bookkeeping services

    This includes updating the financial information in your accounting software, e.g. uploading and allocating bank transactions, capturing invoices/receipts, etc. This service also includes providing advice if you are doing your own bookkeeping.

  • Company closure

    To close down a limited company involves the following: drawing up closure accounts, final tax calculations, submitting the final Corporation Tax Return, VAT Return and FPS to HMRC, informing Companies House of the intended closure, and cancelling any registrations with HMRC (e.g. PAYE, VAT).

    This is included in all our monthly fee packages. Monthly fees will be cancelled as soon as we've completed all the work necessary to close the limited company. After the company's final transaction has been processed and all the required information has been received from the client, it takes us no more than 2-3 days to complete the closure.

  • Company incorporation £11.25

    It takes 1 to 6 working hours to incorporate a limited company. It is cheaper and more straight forward to incorporate a limited company through the BeanBalance website than directly on the Companies House website.

  • Registered office

    This allows you to use our address for your company's registered office. It also includes receiving and filing all post received from HMRC, Companies House and your company's bank; as well as emailing scanned copies to clients if necessary. Additional fees may apply for post received from suppliers and customers.

  • PAYE registration and setting up the company's payroll
  • Monthly Full Payment Submissions for RTI for up to three employees

    With RTI (Real Time Information) that came into effect on the 6th of April 2013, businesses have to submit details of any payments to employees/directors to HMRC on or before the payment date.

  • VAT registration
  • VAT Flat Rate Scheme registration
  • Quarterly VAT Returns

    VAT registered limited companies have to submit VAT Returns to HMRC every three months, even if they have not traded.

  • Tax liability calculation for every invoice / remittance advices

    Calculating the amount of net salary, net dividends and reimbursable expenses contractors can pay themselves per invoice/ period.

  • Expense claim management and advice

    Ongoing specific and general advice on allowable and disallowable expenses.

  • Unlimited phone and email support by a dedicated accounts team

    We have a team of qualified and experienced accountants ready to assist you with whatever services you may require.

  • Annual Shuttle Return

    Every limited company registered in England and Wales have to file an ASR with Companies House at least once a year. Companies House charge a fee of £13 per ASR. Our fee includes this, as well as the completion and submission of the Return.

  • Annual financial statements and Corporation Tax Returns

    Every limited company registered in England and Wales have to file their annual financial statements with Companies House and corporation tax return with HMRC once a year.

  • Additional shareholder £10 pm

    It is common for single shareholder/director limited companies to add their spouse or civil partner as a shareholder. Additional shareholder(s) increase the workload for various services provided during the year, and therefore the additional charge.

  • Self Assessment Tax Return £105**

    One of the requirements for being a director of a limited company is that a Personal Tax Return has to be submitted. Because some clients prefer to do this themselves, we have excluded it in our monthly fee, and therefore the additional charge for those clients who want us to complete their Return.

    **Starting price for basic tax return. Prices will vary depending on the complexity of the tax return.

  • Mortgage applications, Visa applications and reference letters Request Quote
  • Dormant fee structure £25 pm


    This is available to clients on any of our monthly fee structures. The only requirement is that trading is stopped for at least 3 months and that you inform us as soon as you know that you will stop trading. Your monthly fee will be reduced to the amount indicated. This will be applied from the next payment due after you've temporarily stopped trading. If you start trading earlier than the required 3 months break, we will have to settle the difference from the dormant fee payments.

    Even if you stop trading, your company still has all it's filing obligations, which we will continue to do on your behalf while you're on the dormant fee structure.

    VERY IMPORTANT!: We CANNOT apply the dormant fee retrospectively. You therefore have to inform us as soon as you know that you'll stop trading.

Silver

£95.00 Per Month

  • BeanBalance accounting software
  • Tax planning

    Everyone's personal situation is unique, and for us it is of utmost importance to make sure that our clients pay themselves as tax efficiently as possible. We therefor take great care to ensure this, with our monthly paying clients.

  • Accounting services

    This includes advice and work on more complicated tax and accounting issues, e.g. buying, depreciating and writing off assets, issuing shares, directors loans, etc.

  • Bookkeeping services

    This includes updating the financial information in your accounting software, e.g. uploading and allocating bank transactions, capturing invoices/receipts, etc. This service also includes providing advice if you are doing your own bookkeeping.

  • Company closure

    To close down a limited company involves the following: drawing up closure accounts, final tax calculations, submitting the final Corporation Tax Return, VAT Return and FPS to HMRC, informing Companies House of the intended closure, and cancelling any registrations with HMRC (e.g. PAYE, VAT).

    This is included in all our monthly fee packages. Monthly fees will be cancelled as soon as we've completed all the work necessary to close the limited company. After the company's final transaction has been processed and all the required information has been received from the client, it takes us no more than 2-3 days to complete the closure.

  • Company incorporation £11.25

    It takes 1 to 6 working hours to incorporate a limited company. It is cheaper and more straight forward to incorporate a limited company through the BeanBalance website than directly on the Companies House website.

  • Registered office

    This allows you to use our address for your company's registered office. It also includes receiving and filing all post received from HMRC, Companies House and your company's bank; as well as emailing scanned copies to clients if necessary. Additional fees may apply for post received from suppliers and customers.

  • PAYE registration and setting up the company's payroll
  • Monthly Full Payment Submissions for RTI for up to three employees

    With RTI (Real Time Information) that came into effect on the 6th of April 2013, businesses have to submit details of any payments to employees/directors to HMRC on or before the payment date.

  • VAT registration
  • VAT Flat Rate Scheme registration
  • Quarterly VAT Returns

    VAT registered limited companies have to submit VAT Returns to HMRC every three months, even if they have not traded.

  • Tax liability calculation for every invoice / remittance advices

    Calculating the amount of net salary, net dividends and reimbursable expenses contractors can pay themselves per invoice/ period.

  • Expense claim management and advice

    Ongoing specific and general advice on allowable and disallowable expenses.

  • Unlimited phone and email support by a dedicated accounts team

    We have a team of qualified and experienced accountants ready to assist you with whatever services you may require.

  • Annual Shuttle Return

    Every limited company registered in England and Wales have to file an ASR with Companies House at least once a year. Companies House charge a fee of £13 per ASR. Our fee includes this, as well as the completion and submission of the Return.

  • Annual financial statements and Corporation Tax Returns

    Every limited company registered in England and Wales have to file their annual financial statements with Companies House and corporation tax return with HMRC once a year.

  • Additional shareholder £10 pm

    It is common for single shareholder/director limited companies to add their spouse or civil partner as a shareholder. Additional shareholder(s) increase the workload for various services provided during the year, and therefore the additional charge.

  • Self Assessment Tax Return £105**

    One of the requirements for being a director of a limited company is that a Personal Tax Return has to be submitted. Because some clients prefer to do this themselves, we have excluded it in our monthly fee, and therefore the additional charge for those clients who want us to complete their Return.

    **Starting price for basic tax return. Prices will vary depending on the complexity of the tax return.

  • Mortgage applications, Visa applications and reference letters Request Quote
  • Dormant fee structure £40 pm


    This is available to clients on any of our monthly fee structures. The only requirement is that trading is stopped for at least 3 months and that you inform us as soon as you know that you will stop trading. Your monthly fee will be reduced to the amount indicated. This will be applied from the next payment due after you've temporarily stopped trading. If you start trading earlier than the required 3 months break, we will have to settle the difference from the dormant fee payments.

    Even if you stop trading, your company still has all it's filing obligations, which we will continue to do on your behalf while you're on the dormant fee structure.

    VERY IMPORTANT!: We CANNOT apply the dormant fee retrospectively. You therefore have to inform us as soon as you know that you'll stop trading.

Gold

£112.00 Per Month

  • BeanBalance accounting software
  • Tax planning

    Everyone's personal situation is unique, and for us it is of utmost importance to make sure that our clients pay themselves as tax efficiently as possible. We therefor take great care to ensure this, with our monthly paying clients.

  • Accounting services

    This includes advice and work on more complicated tax and accounting issues, e.g. buying, depreciating and writing off assets, issuing shares, directors loans, etc.

  • Bookkeeping services

    This includes updating the financial information in your accounting software, e.g. uploading and allocating bank transactions, capturing invoices/receipts, etc. This service also includes providing advice if you are doing your own bookkeeping.

  • Company closure

    To close down a limited company involves the following: drawing up closure accounts, final tax calculations, submitting the final Corporation Tax Return, VAT Return and FPS to HMRC, informing Companies House of the intended closure, and cancelling any registrations with HMRC (e.g. PAYE, VAT).

    This is included in all our monthly fee packages. Monthly fees will be cancelled as soon as we've completed all the work necessary to close the limited company. After the company's final transaction has been processed and all the required information has been received from the client, it takes us no more than 2-3 days to complete the closure.

  • Company incorporation £11.25

    It takes 1 to 6 working hours to incorporate a limited company. It is cheaper and more straight forward to incorporate a limited company through the BeanBalance website than directly on the Companies House website.

  • Registered office

    This allows you to use our address for your company's registered office. It also includes receiving and filing all post received from HMRC, Companies House and your company's bank; as well as emailing scanned copies to clients if necessary. Additional fees may apply for post received from suppliers and customers.

  • PAYE registration and setting up the company's payroll
  • Monthly Full Payment Submissions for RTI for up to three employees

    With RTI (Real Time Information) that came into effect on the 6th of April 2013, businesses have to submit details of any payments to employees/directors to HMRC on or before the payment date.

  • VAT registration
  • VAT Flat Rate Scheme registration
  • Quarterly VAT Returns

    VAT registered limited companies have to submit VAT Returns to HMRC every three months, even if they have not traded.

  • Tax liability calculation for every invoice / remittance advices

    Calculating the amount of net salary, net dividends and reimbursable expenses contractors can pay themselves per invoice/ period.

  • Expense claim management and advice

    Ongoing specific and general advice on allowable and disallowable expenses.

  • Unlimited phone and email support by a dedicated accounts team

    We have a team of qualified and experienced accountants ready to assist you with whatever services you may require.

  • Annual Shuttle Return

    Every limited company registered in England and Wales have to file an ASR with Companies House at least once a year. Companies House charge a fee of £13 per ASR. Our fee includes this, as well as the completion and submission of the Return.

  • Annual financial statements and Corporation Tax Returns

    Every limited company registered in England and Wales have to file their annual financial statements with Companies House and corporation tax return with HMRC once a year.

  • Additional shareholder £10 pm

    It is common for single shareholder/director limited companies to add their spouse or civil partner as a shareholder. Additional shareholder(s) increase the workload for various services provided during the year, and therefore the additional charge.

  • Self Assessment Tax Return £105**

    One of the requirements for being a director of a limited company is that a Personal Tax Return has to be submitted. Because some clients prefer to do this themselves, we have excluded it in our monthly fee, and therefore the additional charge for those clients who want us to complete their Return.

    **Starting price for basic tax return. Prices will vary depending on the complexity of the tax return.

  • Mortgage applications, Visa applications and reference letters Request Quote
  • Dormant fee structure £40 pm


    This is available to clients on any of our monthly fee structures. The only requirement is that trading is stopped for at least 3 months and that you inform us as soon as you know that you will stop trading. Your monthly fee will be reduced to the amount indicated. This will be applied from the next payment due after you've temporarily stopped trading. If you start trading earlier than the required 3 months break, we will have to settle the difference from the dormant fee payments.

    Even if you stop trading, your company still has all it's filing obligations, which we will continue to do on your behalf while you're on the dormant fee structure.

    VERY IMPORTANT!: We CANNOT apply the dormant fee retrospectively. You therefore have to inform us as soon as you know that you'll stop trading.

Individual Fees (For clients not on monthly products) Excl VAT

Service Price
BeanBalance accounting software Free
Tax planning

Everyone's personal situation is unique, and for us it is of utmost importance to make sure that our clients pay themselves as tax efficiently as possible. We therefor take great care to ensure this, with our monthly paying clients.

From £75 per hour (min charge £25)
Accounting services

This includes advice and work on more complicated tax and accounting issues, e.g. buying, depreciating and writing off assets, issuing shares, directors loans, etc.

From £75 per hour
Bookkeeping services

This includes updating the financial information in your accounting software, e.g. uploading and allocating bank transactions, capturing invoices/receipts, etc. This service also includes providing advice if you are doing your own bookkeeping.

£30 per hour
Company closure

To close down a limited company involves the following: drawing up closure accounts, final tax calculations, submitting the final Corporation Tax Return, VAT Return and FPS to HMRC, informing Companies House of the intended closure, and cancelling any registrations with HMRC (e.g. PAYE, VAT).

This is included in all our monthly fee packages. Monthly fees will be cancelled as soon as we've completed all the work necessary to close the limited company. After the company's final transaction has been processed and all the required information has been received from the client, it takes us no more than 2-3 days to complete the closure.

From £500
Company incorporation

It takes 1 to 6 working hours to incorporate a limited company. It is cheaper and more straight forward to incorporate a limited company through the BeanBalance website than directly on the Companies House website.

£11.25
Registered office

This allows you to use our address for your company's registered office. It also includes receiving and filing all post received from HMRC, Companies House and your company's bank; as well as emailing scanned copies to clients if necessary. Additional fees may apply for post received from suppliers and customers.

£60 per year
PAYE registration and setting up the company's payroll
£20
Monthly Full Payment Submissions for RTI for up to three employees

With RTI (Real Time Information) that came into effect on the 6th of April 2013, businesses have to submit details of any payments to employees/directors to HMRC on or before the payment date.

From £20 per month
VAT registration
£75
VAT Flat Rate Scheme registration
£25
Quarterly VAT Returns

VAT registered limited companies have to submit VAT Returns to HMRC every three months, even if they have not traded.

From £50 per hour
Tax liability calculation for every invoice / remittance advices

Calculating the amount of net salary, net dividends and reimbursable expenses contractors can pay themselves per invoice/ period.

£20 per invoice
Expense claim management and advice

Ongoing specific and general advice on allowable and disallowable expenses.

Hourly fees apply (min £20 per email/call)
Unlimited phone and email support by a dedicated accounts team

We have a team of qualified and experienced accountants ready to assist you with whatever services you may require.

Hourly fees apply (min £20 per email/call)
Annual Shuttle Return

Every limited company registered in England and Wales have to file an ASR with Companies House at least once a year. Companies House charge a fee of £13 per ASR. Our fee includes this, as well as the completion and submission of the Return.

£45 per return
Annual financial statements and Corporation Tax Returns

Every limited company registered in England and Wales have to file their annual financial statements with Companies House and corporation tax return with HMRC once a year.

From £400
Additional shareholder

It is common for single shareholder/director limited companies to add their spouse or civil partner as a shareholder. Additional shareholder(s) increase the workload for various services provided during the year, and therefore the additional charge.

From £50 per hour
Self Assessment Tax Return

One of the requirements for being a director of a limited company is that a Personal Tax Return has to be submitted. Because some clients prefer to do this themselves, we have excluded it in our monthly fee, and therefore the additional charge for those clients who want us to complete their Return.

From £105
Mortgage applications, Visa applications and reference letters
Please request a quote

For a detailed tax calculation, have a look at our tax calculator

IR35

In a nutshell, IR35 came into effect in April 2000 and was designed to tax "disguised employment" at a rate similar to permanent employees. In this context a "disguised employee" refers to a worker who receives payments from a client via an intermediary and whose relationship with their client is such that had they been paid directly they would be an employee of the client and taxed accordingly.

IR35 was introduced to help distinguish between permanent employees and genuine temps/contractors. A contractor who is deemed outside the IR35 legislation can make substantial tax savings as the contractor can earn dividends (which are not subject to National Insurance Contributions).

Even though most contractors will sign an IR35 contract when they accept temp roles through recruitment agencies, these contracts are not always enough to safeguard contractors against IR35. As IR35 is a complex piece of employment law legislation we do advice clients to engage the service of a professional to help them understand their position better with regards to this legislation.

Qdos Consulting offer a well priced one-off review service and they also offer a range of insurance products for contractors. Please have a look at their website for more information.

Also, for more guidance on IR35 you can visit IR35Buddy

Why do I need business insurance?

Your customers, employees, premises and assets can all be at risk. By providing protection for them, business insurance can help safeguard your business. Insurance can be a legal obligation too.

Professional indemnity insurance (PII)

PII is a form of liability insurance that helps protect professional advice- and service-providing individuals and companies from bearing the full cost of defending against a negligence claim made by a client, and damages awarded in such a civil lawsuit.

Employers’ Liability Insurance

An employee who has an accident or their health damaged at work may be entitled to financial support for medical bills and lost earnings if you are found to be negligent. Employers’ liability is a legal requirement if you have staff – even on a part-time or casual basis.

Public Liability Insurance

If your products or services cause injury to a customer or member of the public, your business could face compensation claims. Product liability and Public liability insurance can ensure payments are made for you.

Qdos Consulting offers a wide range of insurance products for contractors.

Please have a look at their website for more information.

Expenses - General Guidelines

In order for business expenses to be deductible it needs to be:

  • incurred in the normal running of the business
  • incurred and paid for
  • incurred wholly, exclusively and necessarily for business purposes
  • Proper records e.g. invoices or receipts needs to be kept for any business expenses incurred for a period of 6 years. A company can pay a penalty of up to £3,000 on top of other possible penalties if proper records are not kept.

Disclaimer:
This guide was written specifically for Easy Online Accounting clients. Some of the information contained in this guide might not be applicable if you do not have a limited company managed by Easy Online Accounting.

If a director of a limited company need to work away from home for business reasons and needs to book into a hotel or bed & breakfast for a period of time, then the cost of the B&B is a deductible business expense. Any part of the cost that is considered personal use cannot be deducted as an expense e.g. like the cost over weekends will be considered personal and not for business.

If the director is working away from home for a long period of time, renting a flat becomes a more cost effective alternative than staying at a hotel. In this case, the rent can be claimed as an expense together with associated costs. I.e. Council tax, water and electricity, gas etc. The rental agreement and bills should be set up in the business name and paid directly from the business bank account.

If you use the flat over weekends then you should again reduce part of the expenses in proportion to personal use.

More Information

Accounting fees incurred for normal business purposes is a deductible business expense.

HMRC could enquire into accounts and tax information for any year. Where this enquiry reveals discrepancies and additional liabilities for the enquired year and it resulted from negligence or fraudulent conduct, the accounting and legal fees will not be deductible.

However, the legal costs are deductible in a case which resulted in no additional taxes payable.

Cost incurred to advertise your business is a deductible business expense, as the idea for advertising is to generate more income for your business.

Annual Parties at Christmas or alternative functions of a similar nature, such as an annual dinner dance, which are open to staff, generally, and which cost no more than £150 per head to provide can be deducted as a business expense. Where there is more than one annual function and the total cost per head exceeds £150, only the function that totals £150 or less will be tax deductible.

Conditions to claim this as a business expense:

  • it’s an annual event, such as a Christmas party or summer barbeque
  • the event is open to all of your employees(even if it is just one employee)
  • the cost per head of the event isn’t more than £150

Money must be outstanding for 6 month or longer from a client before it can be deducted as an expense.

Should you receive the money after you have claimed it as a bad debt expense then the money needs to be declared as income again.

If you are cycling to and from work you are able to claim the mileage at £0.20 per mile. The director can’t claim the cost of the bicycle or for repairs to the bicycle as the bicycle will be the director’s personal property and not owned by the business. Only claiming the 20pence per business mile means that there will be no additional tax implication should the bike be used for personal reasons as well.

Example:
John is currently travelling on his bike to one of his client’s premises which are 6 miles away. John can claim £0.20 per business mile done on his bicycle to and from work. John therefore does 12 miles per day (to and from work) at 20pence a mile = £2.40. John can claim an expense of £2.40 per trip to this client as a deductible business expense.

Business entertainment is not tax deductible. If you take out a client you should ask for separate bills, even if you pay for everything - the bill for your food can then be claimed as subsistence.

Please read these links to HMRC website for more information:
http://www.hmrc.gov.uk/manuals/bimmanual/BIM45020.htm and
http://www.hmrc.gov.uk/manuals/bimmanual/bim45000.htm

A business gift is a deductible business expense as long as it is less than £50 per Donee per year and it carries a conspicuous advertisement for the business. If you spend more than £50 on a person then the whole amount becomes non deductible, not just the amount over £50.

The gift must be a business gift e.g. diary or business calendar, and must not be food, alcoholic drink, tobacco or even vouchers that can be exchanged for these items.

Gifts to charities may also be allowed although many will fall foul of the “wholly and exclusively for business purposes” rule.

Car hire is a deductible business expense. If you have used the rented car for business as well as personal use then you will need to work out the percentage of use for business and only deduct that as a business expense. The best and easiest way to split the cost between business and personal is apportioned it based on amount of time used for both.

Contractors can claim childcare vouchers through a Limited company under the Government childcare Voucher scheme under certain conditions.

Qualifying Conditions of the Childcare Voucher Scheme:

  1. The childcare must be registered or approved
  2. The child
    • must be your child or stepchild whom you maintain either in full or in part; or
    • a child that lives with you and for whom you have parental responsibility; and
    • qualifies up to 1 September after their 15th birthday (or 1st September after their 16th birthday if they are disabled)
  3. Your company’s childcare voucher scheme must be generally available to all employees

What counts as registered or approved childcare?

  1. The childcare provider is registered under Part 3 of the Childcare Act 2006
  2. Childcare provided by the governing body of a school if it takes place outside normal school hours and on school premises or premises covered by the inspection of the whole school activity
  3. Domiciliary worker or nurse from an agency registered under the Domiciliary Care Agencies Regulations 2002 providing childcare in the child’s home
  4. A relative, if all of the following apply:
    • He/she is a registered or approved childcare provider, and
    • The care is provided away from the child’s own home, and
    • The care is provided to non-related children in addition to the related child or children

What does not count as registered or approved childcare?

Childcare provided by a relative in the child’s own home, even if the relative is a registered or approved childcare provider. For these purposes a relative means a parent, step-parent, foster parent, grandparent, aunt/uncle, brother/sister, whether by blood, half blood, marriage or civil partnership.

What records does your limited company need to keep for the childcare voucher scheme?

  1. Evidence that the scheme is offered to all staff where appropriate
  2. Details of the child’s date of birth and where appropriate if the child is disabled
  3. The relationship between the child and employee if the employee is not the parent
  4. Details of the childcare provider’s name and registration/approval number and when, if appropriate, their registration/approval is due to expire
  5. Evidence that employees are required to inform you of any change in circumstances in relation to the child or childcare

Exempt amounts for childcare vouchers and directly contracted childcare

The exemption applies to each individual employee, not per household or number of children. If the qualifying childcare support costs exceed the exempt amount, the excess will need to be paid for personally.

If you joined the childcare voucher scheme before 6th April 2011 you are entitled to £55 a week (or £243 per month).

If you joined the scheme on or after 6th April 2011, the exempt amount you are entitled to depends on your relevant earnings (please see below for definition):

  • Not exceeding £35,000 – up to £55 per week, £243 per month or £2,915 per year
  • Greater than £35,000 but less than £150,000 – up to £28 per week, £124 per month or £1,484 per year
  • £150,000 or more – up to £22 per week, £97 per month or £1,166 per year

An estimate of relevant earnings must be made for the tax year that childcare vouchers are provided for. This excludes any earnings from other employments.

What are ‘relevant earnings’?

Relevant earnings do not include dividend income. For this purpose, ‘relevant earnings’ means any salary, wages or fees and any of the following:

  • Guaranteed contractual bonuses,
  • Contractual commission,
  • Guaranteed overtime payments,
  • Location or cost of living allowances,
  • Shift allowances,
  • Skills allowances,
  • Retention and recruitment allowances, and
  • Market rate supplements.

What if the childcare is paid directly from my business bank account (i.e. not going through a specific childcare voucher company)?

This is called ‘directly contracted childcare’ and the same exempt amounts apply as they do for childcare vouchers. This means your company can pay a childcare provider up to these amounts and you will not have to pay Income Tax or NICs.

Your company will need to write to the childcare provider about its intention to buy a certain amount of childcare. See below for an example of such a letter.

Where your company enters into such an arrangement with a childcare provider and there is an existing agreement between the provider and yourself/person concerned, HMRC would normally expect there to be a variation in that agreement to take account of the new arrangements in place between your company and the childcare provider.

Example Letter:

Henry the Cat Day Nursery
1 Nursery Hill
London

Dear Sir

I agree to purchase childcare from you to the amount of £55 per week from 6 September 2013. I intend to give the childcare as a benefit to my employee John Smith for use by his daughter, Jane. This agreement may be amended or cancelled if John leaves my employment.

Yours faithfully,

A Jones
Jones' Hardware Ltd

Specialist clothing bought for work - like a uniform or protective clothing can be deducted as a business expense.

Example of business clothes: Safety boots, safety jacket, overalls, helmets, clothes that have got the companies logo on or if you are a nurse, doctor, butcher, builder etc and you need to buy specific clothes for your job.

General office clothing like business suites are not tax deductible expenses.

More Information

Costs incurred for setting up the business are deductible expenses.

Computer consumables solely bought for the business e.g printer cartridges ets are deductible business expenses.

Computer equipment solely bought for the business e.g. Laptop, printer, fax machine, shredder or scanner are deductible business expenses. Businesses need these equipment to operate.

Software that is bought wholly, exclusively and necessarily for business purposes is a deductible expense. The software must not be for self-interest or personal use.

Example:
David is the sole director and shareholder of his accounting business and he recently had to incur the following expenses:

  • Renewal of anti-virus software for all business computers
  • Annual subscription fee for accounting software used
  • Photoshop software for his photography hobby

David will be able to deduct the costs for renewing his anti-virus software and also the subscription for the accounting software as a business expense. He will not be able to deduct the cost of the Photoshop software as this is for personal or self interest use, not for business purposes

Cost incurred for business conferences are deductible business expenses

The director’s gross salary (Net salary plus employee national insurance and employer national insurance) is a deductible business expense.

You pay Income Tax on your earnings in the same way as other employees. However, your National Insurance contributions are worked out over an ‘annual earnings period’ - from 6 April to the following 5 April - rather than over the normal weekly or monthly periods that apply to other employees. This is to make sure you pay the right amount of National Insurance contributions.

More Information

Qualifying charitable donations are tax deductible in your company (but only in so far your company makes profits, and only actual payments made during the financial year are allowable for tax). Please refer to this link for more information: More Information

If you are a higher rate earner it would be more beneficial for you to make a gift aid contribution in your personal name. The reason for this is because your higher rate tax band is increased with the grossed up amount of the donation contribution that you’ve made.

For example:

You’ve made a gift aid contribution of £800, so your higher rate tax band will increase with £1,000. This means you can earn another £1,000 of gross dividends tax free – that’s another £900 net dividend that you can receive without having to pay additional tax on dividends.

If your company makes a £1,000 qualifying charity contribution, it will get 20% tax relief. So, net cash outflow for your company will be £800. If you make the same gift aid contribution from your personal name, you only need to pay £800 to the charity for it to receive £1,000 (this is because the charity can get £200 through a Gift Aid tax repayment claim). So, the net cash outflow is the same for both, but the benefit of claiming it in your personal tax return is that you can take out another £900 from your company without having to pay personal tax on it.

It is important to make sure you pay enough personal tax to cover the Gift Aid claimed by the charity. Please refer to this link for more information: More Information

Personal tax payments include any of the following:

  • Tax deducted from savings interest
  • Tax on pensions
  • Tax on investment or rental income
  • Tax credits on UK dividends
  • Capital Gains Tax

Employee’s gross salary amount is a deductible business expense.

Directors can claim costs incurred on eye test in the following circumstances:

  • Eye tests that are required by health and safety legislation for employees who are required to use a computer screen or other VDU (visual display units)
  • Glasses or contact lenses that you’re obliged to provide because an eye test required by health and safety legislation shows them to be necessary for VDU work – as long as the glasses or lenses are only used for VDU work
  • Expenses can not be claimed on glasses or contact lenses that are used for everyday wear

Business flights are deductible business expenses as long it was taken solely for business reasons.

Example 1:
You are a contractor and you need to fly at your own cost to Australia to do some work for clients based in Australia. This flight was taken wholly, exclusively and necessarily for business purposes and it is therefore a deductible expense.

Example 2:
You are flying to Australia to attend a family wedding and while you are there you will be doing work that you would have done if you were in the UK. If you ask yourself was this flight wholly, exclusively and necessarily taken for business purposes then the answer is clearly no, so you can’t deduct this flight as an expense as it was not taken solely for business purposes even though you will be working while you in Australia.

Expenses incurred by the employer in providing periodic medical check-ups for employees or director are a deductible business expense. If a company incurs expenses in providing check-ups for members of an employee or director’s family or household this represents a benefit chargeable on the employee unless the family or household member is also an employee of the Company who provides the check-up.

If an employer provides an employee up to one health screening and/or medical check-up per year, the cost of provision is exempt from charge as an employment-related benefit as long as:

  • the health screening is generally available to all employees, and/or
  • the medical check-up is generally available to all employees, or to all employees identified in a previous screening as needing a check-up

Not all employees have to take up the option to undergo health screening and/or a medical check-up, but all employees must have the opportunity to do so. There is no requirement that all employees should receive the same screening and/or check-up, or that the screening/check-op should be made available at the same intervals for all employees.

“Health screening” refers to an assessment to identify employees who might be at risk of ill health. “Medical check-up” refers to a physical examination of an employee by a health professional which is limited to determining the employee’s state of health.

If the screening and/or the check-up results in the employee being provided with medical treatment, the exemption does not apply to any treatment that is subsequently made available.

More Information

Insurance taken out for business purposes are deductible expenses e.g. Insurance for Office contents, Executive income protection, Key man life, Tax investigation, Professional indemnity, Public liability, Employers liability.

Again, if insurance is taken out for personal assets then it is not a deductible expense.

Interest paid on borrowings for trade purposes is a deductible business expense.

If your internet/broadband is NOT 100% for business use, then it should be part of your use of home claim. Please see the ‘use of home’ expense help for more information.

Magazines and books bought for business purposes is a deductible expense. This does not include books bought for personal use or books for self interest.

If your landline is NOT 100% for business use, then it should be part of your use of home claim. Please see the ‘use of home’ expense help for more information.

Lease rental agreements taken out in the business name is a deductible business expense. It often happens that a business will lease for example a photo copy machine instead of buying it, these rental lease expenses are deductible.

A legal fee that directly relates to the business is a deductible business expense. HMRC could enquire into accounts information for any year. Where this enquiry reveals discrepancies and additional liabilities for the enquired year and it resulted from negligence or fraudulent conduct, the accounting and legal fees will not be deductible.

However, the legal costs are deductible in a case which resulted in no additional income or additional taxes payable.

Necessary medical treatment incurred by an employer is deductible if incurred by the employee while the employee was working abroad, or borne by the employee and reimbursed by the employer, where an employee becomes ill or suffers injury while away from the UK in the performance of his or her duties, and of providing insurance for the employee against the cost of such treatment.

Keep in mind that you are both an employee and employer in your limited company.

If the subscription is for the benefit of the trade (wholly, exclusively and necessarily) then this is a deductible expense.

For Example:
An Optometrist have set up a business and she has got 2 subscriptions or membership fees, the one is the membership to the professional Optometrist body and the other is her monthly gym membership.

To be able to practise as an optometrist she needs to be registered with a recognised professional body and need to pay the annual subscription fee, this will be a deductible business expense as the optometrist can’t practise without the subscription or membership.

The monthly gym membership is not a deductible business expense as this is not wholly, exclusively and necessarily needed to operate her business, instead this is a personal expense.

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A director using his or her own car for business travel can claim £0.45 per business mile for the first 10,000 miles and £0.25 for each business mile above 10,000 miles as an expense per tax year.

If the director uses a motorcycle for business travel the deduction is £0.24 for all business miles in a tax year.

The 45p and 25p covers all your business related travel costs, Petrol, Insurance on the car, maintenance etc. so you can’t claim these expenses on top of the £0.45 and £0.25 allowance.

For Example:
Laura is a director of a Limited company and uses her own car to drive to her clients. In the tax year 11/12 (06 April 2011 to 05 April 2012) she drove a total of 12 500 business miles driven.

This means she can claim £0.45 as an expense for the first 10 000 miles and £0.25 for the 2500 miles over 10 000.

Total deductible business expenses that can be claimed = (10 000 x £0.45) + (2500 x £0.25) = £5,125

This means the business can refund Laura £5,125 for the tax year and this will be a deductible business expense.

No additional tax will be paid by Laura as long as she does not claim more than the 45 pence for the first 10 000 miles and 25 pence for business miles over 10 000 per tax year. Laura will need to keep an accurate log book of her miles that was for business e.g date travelled, from where to where and distance travelled.

deductible business travel must be to a “temporary workplace”. A “temporary workplace” is a workplace attended by an employee or contractor for a limited duration of time which is less than 24 months. It is important to note that a “temporary workplace” is no longer considered temporary from the day the employee or contractor expects to work at the same place for longer than 24 months. A contractor or employee therefore accepting a 30 month contract will not be able to deduct any mileage or travel expenses as this will not be a “temporary workplace” from day one.

More Information

You have two options claiming for mobile phone expenses:

  • Either you pay for it personally and the company reimburses you (but beware of PAYE/ NI charges), OR
  • The contract is in the company’s name and the company pays the monthly bill directly to the provider (preferred option).

If the contract is directly between the company and the provider, then the full cost is an allowable expense paid directly by the business. One mobile phone provided for private use is exempt from a tax charge on Employment Income. The exemption covers the phone itself, any line rental and the cost of private calls paid for by the employer on that phone.

Phones used solely for business purposes are exempt, and there’s no limit as to how many of these phones you can have; as long as the private use is minimal.

If the mobile contract is not in the company’s name, then only the business call charges over the monthly phone tariff or PAYG charges for business calls can be reimbursed tax free.

Please see these HMRC links for more information:
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Employee and Employer National Insurance are deductible business expenses. Employee National Insurance and PAYE tax is included in the gross salary amount of an employee and director’s salary, so the gross salary (This is your net salary plus employee National Insurance and PAYE tax) plus employer National Insurance is a deductible expense.

If you are renting office space for the business then this is a deductible business expense

Parking fees while on business travel is a deductible expense. Again any fee that relates to personal use is not deductible.

For Example:
Adam had to drive to a client’s office for a meeting and he incurred parking fees while at the client’s offices. On the way back from the meeting Adam stopped at Tesco’s to do his weekly shopping and paid for parking there as well.

Adam can only deduct the parking fee paid while he was at the client’s offices as an expense. The parking fee paid while at Tesco’s was for personal reasons, not for business.

Cost incurred for patent royalties and copyright royalties paid in connection with an individual’s trade are deductible expenses.

Penalties and interest paid on late paid tax are NOT deductible expenses. Penalties paid to companieshouse for late filing of financials is also not a deductible expenses.

Pension contributions is a deductible expense as long as the contributions are relative compared to the amount of salary earned. HMRC don’t give clear guidelines as to what it means with relative, so if you do have concerns about this, then you can always increase the amount of Gross salary you pay yourself to bring it more in line with the amount of pension contributions you would like to make.

You should carefully consider your options as your tax will be higher on an increased salary as you pay PAYE tax, Employer National Insurance and Employee National Insurance on your salary amount.

Please note that you should not claim for petrol, you should rather claim mileage as this is more advantageous for you; and you can’t claim both as that would be double counting.

A director using his or her own car for business travel can claim £0.45 per business mile for the first 10,000 miles and £0.25 for each business mile above 10,000 miles as an expense per tax year.

If the director uses a motorcycle for business travel the deduction is £0.24 for all business miles in a tax year.

The 45p and 25p covers all your business related travel costs, Petrol, Insurance on the car, maintenance etc. so you can’t claim these expenses on top of the 45p and 25p allowance.

For Example:
Laura is a director of a Limited company and uses her own car to drive to her clients. In the tax year 10/11 (06 April 2010 to 05/04/2011) she drove a total of 12 500 business miles driven.

This means she can claim £0.45 as an expense for the first 10 000 miles and £0.25 for the 2500 miles over 10 000.

Total deductible business expenses that can be claimed = (10 000 x £0.45) + (2500 x £0.25) = £5,125

This means the business can refund Laura £5,125 for the tax year and this will be a deductible business expense.

No additional tax will be paid by Laura as long as she does not claim more than the 45p for the first 10 000 miles and 25p for business miles over 10 000 per tax year. Laura will need to keep an accurate log book of her miles that was for business e.g date travelled, from where to where and distance travelled.

deductible business travel must be to a “temporary workplace”. A “temporary workplace” is a workplace attended by an employee or contractor for a limited duration of time which is less than 24 months. It is important to note that a “temporary workplace” is no longer considered temporary from the day the employee or contractor expects to work at the same place for longer than 24 months. A contractor or employee therefore accepting a 30 month contract will not be able to deduct any mileage or travel expenses as this will not be a “temporary workplace” from day one.

More Information

Costs incurred for professional fees are deductible as long as they were incurred solely for business purposes. Professional fees paid for personal reasons are not deductible.

More Information

Costs for the repair of any business equipment e.g. computers/printers are deductible business expenses.

Costs incurred on stationery for the business is a deductible business expense. Costs incurred for any business material printing e.g. letters, flyers, posters etc. is a deductible business expense. Postage paid for business purposes are deductible business expenses.

Staff entertainment is allowable if it’s an annual party/function (e.g. Christmas party or summer barbeque) and available to all directors/ employees.

Directors/ employees are allowed to bring a guest.

Annual parties/functions are allowable if the total cost for the year per person (guests included) does not exceed £150.

Please note that the £150 is not an allowance. If the total cost per person goes over £150 then whichever functions best utilise the £150 are allowable. The others are taxable to the directors/employees and their guests, or have to be repaid to the company to avoid a personal tax charge.

Please read these HMRC links for more information:
http://www.hmrc.gov.uk/manuals/bimmanual/bim45033.htm and
http://www.hmrc.gov.uk/manuals/eimanual/EIM21690.htm

Subsistence is allowable if in conjunction with business travel to a temporary workplace. Please see travelling expense for more details.

Subsistence Framework:

Breakfast rate (irregular early starters only) - A rate of up to £5.00 may be paid where a worker leaves home earlier than usual and before 6.00 am and incurs a cost on breakfast taken away from his home. If the employee regularly leaves home before 6.00 am because, for example, he works an early shift he would not be entitled to use the breakfast benchmark scale rate.

One meal rate (Five hour rate) - A rate of up to £5.00 may be paid where the worker has been away from his home/normal place of work for a period of at least five hours and has incurred a cost on a meal.

Two meal rate (Ten hour rate) - A rate of up to £10.00 may be paid where the worker has been away from his home/normal place of work for a period of at least ten hours and has incurred a cost on a meal or meals.

Late evening meal rate (irregular late finishers only) - A rate of up to £15.00 may be paid where the employee has to work later than usual, finishes work after 8.00 pm having worked his normal day and has to buy a meal which he would usually have at home.

If the employee is paid an allowance under the five or ten hour rule, the late meal allowance could still be paid if he finishes work after 8.00 pm and buys a meal that he would usually have at home. However, if the employee regularly finishes work late because, for example, he normally works the afternoon or evening shift, he would not be entitled to use the late evening meal rate.

Qualifying conditions

Benchmark scale rates must only be used where all the qualifying conditions are met. The qualifying conditions are:

  • the travel must be in the performance of an employee’s duties or to a temporary place of work
  • the employee should be absent from his normal place of work or home for a continuous period in excess of five hours or ten hours
  • the employee should have incurred a cost on a meal (food and drink) after starting the journey

Early starter and late finisher rates:

The early starter and late finisher rates are for use in exceptional circumstances only and not intended for employees with regular early or late work patterns. Tax and NICs free scale rate payments must be limited to three meal rates in one day (or 24 hour period). A meal is defined as a combination of food and drink. Where employees are required to start early or finish late on a regular basis, the over five hours or over ten hours rates could be paid provided all the other qualifying rules are satisfied.

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Taxi fare is a deductible business expense only if it was wholly, exclusively and necessarily for business purposes.

What are business journeys?

You can only get tax relief on the cost of business journeys. These are when, as part of your job:

  • you have to travel from one workplace to another - this includes travelling between your main 'permanent workplace' and a temporary workplace
  • you've got to travel to or from a certain workplace because your job requires you to

Business journeys DO NOT include:

  • ordinary commuting - when you travel between your home (or anywhere that is not a workplace) and a place which counts as a permanent workplace
  • private journeys - which have nothing to do with your job

deductible business travel must be to a “temporary workplace. A “temporary workplace” is a workplace attended by an employee or contractor for a limited duration of time which is less than 24 months.

It is important to note that a “temporary workplace” is no longer considered temporary from the day the employee or contractor expects to work at the same place for longer than 24 months. A contractor or employee therefore accepting a 30 month contract will not be able to deduct any mileage or travel expenses as this will not be a “temporary workplace” from day one.

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Specialist tools bought solely for business purposes are deductible business expenses.

More Information

Expenses for training are deductible where these expenses are incurred for the purpose of updating existing knowledge and skills, and not for the purpose of obtaining new knowledge or skills. In the case where the course or training is for personal development or for self interest then it is not deductible.

For Example:
John has got his own building business and John needs to do a health and safety course every year to comply with current legislation. John is also studying towards becoming a mechanical engineer.

The cost of the health and safety course is a deductible business expense, but the cost of the course in mechanical engineering is not a deductible expense. John does not need this qualification for his business, so the expense is not wholly, exclusively and necessarily for business purposes.

The same applies for example if someone who's got his own bookkeeping company. The director will need to do some courses and training every year to stay up to date with changes in the industry and these courses will be deductible as it is business related. If the director is only partly qualified and wants to further his career by doing his CIMA qualification then this will not be a deductible business expense as the director will be acquiring new knowledge and skills with the CIMA qualification.

Fees for courses and training should be paid from the business bank account and invoices made out to the business.

Contractors can claim travel costs incurred for business purposes. If travel costs are incurred for business as well as personal then the costs need to be apportioned and only the business portion of it can be deducted as an expense.

For the expense to allowable, it must be for travel to a ‘temporary workplace’. A ‘temporary workplace’ is one that is for a limited duration of time (less than 24 months). It is important to note that a ‘temporary workplace’ is no longer considered temporary from the day the employee/contractor expects to work for the same employer/client for longer than 24 months.

E.g. a contractor accepting a 30 month contract will not be able to deduct any mileage or travel expenses for the entire contract period; or a contractor having their contract renewed every 6 months has to stop claiming for travel expenses straight after the contract renewal taking the total contract time up to 2 years, so they’ll only be able to claim for travel expenses for 18 months.

You basically have three options:

  • Claim £4 per week (£3 per week before 6 April 2012, and £2 per week before 6 April 2008).
  • Claim for the extra costs of gas and electricity as a result of using your home for work; as well as business phone calls and internet usage.
  • Set up a formal contract for the rental agreement between yourself and your company for the space used for business. Please note that the rental income has to be declared in your personal tax return, and beware of the possible CGT implications.

Requirements for claiming use of home:

  • use of home must be wholly, exclusively and necessarily for business purposes - it should be a requirement for you to work from home, and not merely a convenience.
  • you can only claim for performance of duties that earn money for your service company.
  • you should only claim for the additional costs incurred as a result of using your home for work.
  • your contract should not specify that duties have to be carried out on client premises, or ban taking work off site. Ideally the contract with your client should require you to work from home.

You are not eligible to claim expenses for any of the fixed costs of running your home, i.e.:

  • Council Tax/rates
  • Rent
  • Water rates (fixed water rates rather than a water meter)
  • Mortgage interest
  • Insurance

Relevant HMRC links:
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  • info@easylimited.co.uk
  • 020 3405 2320
  • Collingham House, Gladstone Road
  • London, SW19 1QT
  • http://www.eoacc.com

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