What expenses can I claim as a contractor?

Chris Andreou

May 5, 2021

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Contractors

As a contractor, there are a vast number of different expenses that can be claimed for when working through a limited company.

These expenses must be deemed wholly, exclusively and necessary for business to carry out it's duties and some examples can include:

  • Travel
  • Food (subsistence)
  • Accommodation
  • Computer & office equipment
  • Postage & Stationery
  • Accountancy, legal & professional fees
  • Business insurance
  • Marketing
  • Subscription
  • Telephone & internet

Further information is available on our limited company expenses and tax allowances guide.

If you're working through an umbrella company, the types of expenses you can claim for may include:

  • Client billable expenses
  • Business costs
  • Non-client billable expenses

If you're subject to the SDC legislation, you won't be able to claim for home-to-work travel and subsistence expenses. Find out more in our guide to umbrella contractor expenses.

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Personally paid expenses vs company paid expenses

Where possible, it is advisable to cover any company expenditure directly using company funds such as directly via the company bank account. This ensures that all company transactions are kept in one place and can be easily tracked.

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Can I expense Trivial benefits?

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Can I expense Hire and rental charges?

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Can I expense a Laptop?

The portability of a laptop brings in a layer of complexity, as they tend to be purchased for both business and personal use. You can claim it as an expense, but you will need to apportion between business and personal use.

For further information on allowable business expenses, refer to our expenses and allowances guides for limited company directors and the self-employed.

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Can I expense Subcontractor costs?

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What is the 24 Month Rule for Directors Expenses?

The 24-month rule, also referred to as the two-year rule, enables contractors to claim travel expenses from their home to a client's office, as long as it is classed as a "temporary workplace".

The following conditions must apply for a work location to be classed as a "temporary workplace"

  • The period of engagement is less than 24 months
  • The contractor should spend less than 40 percent of their time at the workplace

Essentially, if you work at the client's office for more than 24 months, or spend more than 40 percent of your time at the location, it is considered a permanent workplace-and as such, you won't be able to claim travel or subsistence expenses.

Bear in mind that this is subject to the SDC legislation introduced in April 2016. Further elaboration on SDC can be found in our guide to claiming expenses as an umbrella company contractor.

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Can I expense Late tax payment penalties?

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Can I expense Professional fees?

The costs incurred for engaging professional services-such as hiring an accountant, lawyer or architect-can be claimed as an allowable expense, as long as these services are carried out solely for business purposes.

For further information on allowable business expenses, refer to our expenses and allowances guides for limited company directors and the self-employed.

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What are the disadvantages of contracting?

The disadvantages of contracting are:

  • Uncertainty: Due to the flexible nature of their working relationships, contractors aren't guaranteed work after the end of assignment or project.
  • Responsibility: Not only is it the responsibility of the contractor to find work, they are also responsible for their own finances.
  • Employment rights: As a contractor, you generally wouldn't find yourself holding employment rights that permanent employees benefit from.
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Can I expense car?

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Can I expense Mileage?

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Christmas Company Expenses Guide

  • Christmas expenses overview
  • Staff party claims
  • Gift voucher claims
  • Gift claims
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What are the HMRC approved mileage rates?

The HMRC approved mileage rates are as follows:

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Can I expense Pensions?

As a sole trader, you can't claim pension contributions as a deductible expense. However, you can get personal tax relief from contributions you make into your pension scheme.

If you're a limited company director, you have the option of making pension contributions through your company. This will reduce your company's profits, and as such reduce the amount of corporation tax your company pays.

For further information on allowable business expenses, refer to our expenses and allowances guides for limited company directors and the self-employed.

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How to Become a Contractor

So, you're thinking of becoming a contractor.

There's probably one of three reasons driving this:

You've received a Job Offer

You've just received a job offer, and now need to decide on whether to set up a limited company, umbrella company or become a sole trader (or you may not have the choice in deciding).

You're in the right place.

This guide will walk you through the best company structure for you, accounting support, VAT, business services you need to consider and finding new opportunities.

You want to increase your pay

You'd like to increase your pay by switching from permanent roles to interim/ contractor roles.

Contracting can be very lucrative.

You'll need to be comfortable with a certain level of risk (short notice periods), increased monthly admin (as a Limited Company) and less benefits than being an employee (paid leave, sick days).

However, you'll earn more, get greater flexibility and hopefully grow a consulting business.

Project Flexibility

Getting multiple requests for your services? Amazing.

Setting yourself up as a contractor through a Limited Company means you can start expanding your client base rapidly and work on different projects a few days a week.

You can still set this up as a current PAYE employee of a company, and this can be a great stepping stone to launching your own business.

Let's talk about the right business structure for you.

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Can I expense Business Rates?

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Guide to employing or hiring contractors

You have an important project at hand, and you require a contractor's specialist knowledge to fill in the skill gap in your team. You're ready to hire-except that you're unfamiliar with the hiring process.

If this is your first time hiring a contractor, our article will guide you through the essentials.

We'll cover the following:

  • Sourcing for contractors
  • Assessing contractor CVs
  • Interviewing a contractor
  • Payments
  • Contract terms
  • Terminating a contract
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Limited company expenses & tax allowances guide

As a limited company director, you want to run your business in the most tax efficient way possible.

One way to achieve this is to claim for allowable business expenses correctly, so that you don't wind up having to pay more tax than you are legally obliged to.

It can be tricky figuring out what you can or cannot claim for, and this is where our guide comes into play.

We'll run through the different expenses you can claim for, but bear in mind that this isn't a definitive guide. Do check out our resource hub on limited company tax topics for more information, or consult our specialist accountants at Forma if you need personalised advice.

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Can I expense Charitable Donations?

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What are the different types of contractors?

There are different types of contractor jobs available across diverse sectors. Contractors may be hired to perform services such as:

  • Marketing
  • IT maintenance and support
  • Graphic design
  • Recruitment
  • Business development
  • Catering
  • Construction work
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