One of the most frequently asked questions from a sole trader is in relation to travel expenses and what can be claimed against the business.

The general rule is that the cost of business travel is an allowable cost.  The question then is what is business travel?

This will depend on how you work and where your base of operation is.

Commuting is not business travel and therefore cannot be claimed. So, if you go the same place every day to work, such as an office or clinic, then that is commuting.  If you do work from home, but also have another regular and predictable place of business, then travel to that place is deemed commuting. eg a hairdresser may see some clients at home but also work in the same salon twice a week.  If you store equipment in a depot and go there to pick it up before working elsewhere, travel to the depot is also deemed commuting.

It is important therefore to determine where you base of operation is as mistakes can be costly.   Everyone’s situation will be different but where you keep your files and accounting records, where you do your admin, keep your tools, where you source new work would all be contributing factors.

What about my daily dose of caffeine in the local coffee shop while I work?

HMRC’s view is that refreshments purchased away from the normal place of business are not an allowable cost of running the business – as they have a dual purpose (you must eat to live!)

Note this is different to the treatment of employees subsistence and for limited companies.

The only time when you will be able to claim these is when occasional business journeys are made outside the normal pattern of work (eg you live and work in London but you go to Birmingham for the day to an exhibition) or where your work is of an “itinerant nature” – so you are constantly on the road.

If your trip requires you to stay away from home overnight, then hotel and reasonable subsistence costs are allowable.

So if you are meeting clients in coffee shops, rather than home, then all those coffees and cakes are not going to be an allowable cost to the business.  You maybe surprised by this – as a couple of coffee’s is cheaper than renting a meeting room – but those are the rules!

For more information please contact Rosie Forsyth at Wilkins & Co.

The Marriage Allowance was introduced in April 2015 and could save you £220 this year in tax (and £212 last year) but the take up has been very low, as couples just don’t know about it.  Its free money, so worth checking if you are eligible.

To qualify all of the following must apply:

• You are married or in a civil partnership ( just living together doesn’t count)
• Your income is under £11,000 in total in this tax year (£10,600 for 15/16)
• Your partner’s income is between £11,000 and £43,000

If so, the Marriage Allowances lets you transfer £1,100 of your personal allowance to your husband, wife or civil partner, if they are the higher earner.  That means effectively they can earn £1,100 more before they start paying tax, which will save you as a couple £220 a year.

Simple!

If you were eligible in 15/16, you can backdate your claim to 6 April 2015 and you can claim online by clicking here.  It’s the non-tax payer who needs to apply.  The allowance stays in force until one of you cancels it.

Once claimed, your partner will either have their tax code changed (and therefore pay less tax each month on their salary), or claim the allowance on their tax return, if they are self-employed.

The allowance is most likely to be used by part time workers or the newly self-employed with high initial costs.  For the self-employed, it’s the profit figure that you need to be looking at to determine if you qualify, not your sales figure – so you should check each year if profits vary year on year.

For more information contact Rosie Forsyth of Wilkins & Co.

Petrol receipts are notorious for getting lost on the floor of the car, at the bottom of your bag or anywhere other than in your filing system!  But do you actually need to keep them if you use your car for business?

Like working from home, there are 2 main methods of claiming motor expenses – one more complicated than the other.

The Mileage Method (simple!)

This is simple to work out and generally used if you are not doing lots of business mileage in your car.  If you use the family car occasionally for work, then this method would be the one for you to use.

You simply keep a record of the number of business miles you do and then calculate a flat rate of 45p per mile (for the first 10,000 miles) and then 25p per mile on anything over this.

You then do not charge the business for any other car related costs such as insurance, servicing, petrol etc.  These should all be paid for privately, and therefore you don’t need to keep the petrol receipts.  The actual cost of buying the car is not separately reflected in your accounts either under this method.

You can claim for extra journey costs such as parking, congestion charge and toll roads in addition to the 45p per mile.

Obviously you need good record keeping for this method – most people keep a note in their diary or in a notebook in the car of business miles done.

You can only use this method if your turnover is below the VAT registration threshold (currently £83,000) and once you have started using it, you can only change methods if you change your car – you can’t chop and change methods each year.

The Actual Cost Method

This is more complicated to work out, but generally beneficial is you use your car predominantly for work, with little private usage – or you have high repair bills!

Under this method, the business pays for all your motor costs.  You can include fuel, repairs, MOT, servicing, insurance, tax and breakdown cover, and therefore you do need receipts to back up your expenditure.  You then work out the percentage of your costs that relates to private use and disallow the private element in your accounts.  So if you use your car 80% for business, and 20% privately, then the business can pay for 80% of the cost.  In reality, what usually happens is you pay for all the costs from the business and then your accountant will make the adjustment in your accounts at the year end to reflect the private usage of the car.

You will need to keep records to be able to estimate the percentages – HMRC would really like to see records for about 3 months to give you an idea of the business usage.

The cost of the car can also recorded in the accounts under the actual cost method, and tax relief given via capital allowances but that’s for another blog!!

Under both methods, parking, speeding fines and driving awareness courses are never a business expense so don’t try to claim them!!

If you have any queries, then please contact Rosie Forsyth at Wilkins & Co.

If you are limited company owner, once a year you will get a letter from Companies House – headed “URGENT –ANNUAL RETURN DUE”.  This will throw you into complete panic as you think it means your accounts and you’ll be on the phone to your accountant in a hot sweat as your accounts are still in the pile of things to do.  Your accountant will (hopefully!) calm you down, tell you it’s just a simple online form that needs doing, and you won’t end up in jail if it’s late, as suggested by the letter!

From 30 June 2016 the Confirmation Statement replaces the Annual Return and hopefully the name change may reduce the moment of panic when it lands on your doorstep!  The purpose of the Confirmation Statement is to provide up to date information about your company for inclusion on the public register – so anyone who looks up your company gets accurate information.

To complete the Statement, you need to check and confirm the information already held at Companies House – about who the directors of the company are, where the Registered Office is, and who holds the shares.  A new addition to the Register is the “People with Significant Control” (PSC) register.  For most small companies, this is a bit of duplication – as it will be the shareholders; but for larger companies you could have minority shareholders who actually have a lot of say in the company, and this register is meant to draw that fact to your attention.  It only needs completing once, and then confirming each year.

The form can be completed online and there is a filing fee of £13 to pay.  Don’t be drawn into one of the websites offering to do it for you for an “often not insignificant fee” – you really can do it yourself very easily.  Alternatively your accountant will do it for you for a nominal sum (or at least – I do for my clients!!)  You will need to be registered with Companies House to be able to file – which means more passwords being sent to you in the post!

For further information about the Confirmation Statement, here is the link:

https://companieshouse.blog.gov.uk/2016/05/27/changes-that-affect-you-confirmation-statement