Because businesses pay tax on their profits, they can claim the tax back on things they have brought for business purposes.
This can help you to save a lot of money if used properly but can also get you into some serious trouble if you abuse the system. We’ve all heard someone say “Don’t worry I’ll put it through the books” but which expenses can you safely associate with your business in order to get some money off?
Here, we run through the three main acceptable expenses; stick to these and you can’t go wrong.
If your company relies on the use of a vehicle, for example if you are responsible for the deliveries of your products, you have a haulage company which transports goods, or you have a taxi firm that transports people, you can make a claim to deduct the tax from your costs. However, when it comes to vehicles the cost is deducted from the amount of fuel you use. This is calculated on a mileage basis; with a refund being given to you whenever you hit a certain number of miles driven in the vehicle. It is also possible, depending on the seller, to have money deducted from the initial cost of the vehicle, whether you buy it outright or have a lease agreement with monthly payments. Make sure you also consider a traders policy if you do use a vehicle for your business.
The cost of business premises can be one of the biggest overheads you will pay as a company, so it is good news that you can claim tax back on this. The tax-deductible costs include the rent paid for the premises as well as any bills associated with the running of it. For example, water, heating and electricity can be claimed for. This is also the case if you’re running a business from your own home, and this works on a percentage basis. So, if you use 10% of your home for a home office from which you run your business, you can claim back the tax on 10% of the rent.
All of the equipment you purchase for the benefit of your business is tax deductible. This can include a great many things starting with industrial sized machinery, all the way down to a desk and stationery for the office. Make sure you do your research when it comes to equipment as there are lots of things that are easy to overlook, such as the staff Christmas do and any catering that has been organised in order to entertain clients.
Claiming tax back on business expenses can be a tricky process but by following these guidelines, you can make sure that you are not penalised for making unacceptable claims. When it comes to calculating the expenses and deductions it is important to hire a professional business accountant. As well as making sure everything is in order, they can also make suggestions on what else you could claim for based on their own thorough knowledge of tax-deductible expenses. For more business tips, take a look at kitkash.co.uk.