One of the key benefits of operating through a limited company outside IR35 is the ability to claim legitimate business expenses against your revenue, reducing your Corporation Tax bill. Understanding what you can and cannot claim is essential.
Travel and subsistence
If your contract is at a temporary workplace (broadly, an engagement expected to last less than 24 months), you can claim travel costs to and from the client site. This includes mileage at HMRC's approved rates (currently 45p per mile for the first 10,000 miles), train fares, and reasonable subsistence costs for meals when away from your normal base. Keep receipts for everything.
Home office costs
If you work from home, you can claim a proportion of household costs including heating, electricity, broadband, and council tax. HMRC allows a flat rate claim of £6 per week without receipts, or you can calculate the actual proportion based on the number of rooms used and hours worked. Your accountant can advise which method produces the better result.
Equipment and software
Laptops, monitors, keyboards, and other equipment purchased for business use are allowable expenses. Software subscriptions, cloud services, and professional tools are also claimable. If an item is used partly for personal use, only the business proportion can be claimed.
Professional development
Training courses, certifications, books, and conference fees that are directly relevant to your contracting work are allowable expenses. An AWS certification course for a cloud engineer contractor, for example, would be fully claimable.
Insurance
Professional indemnity insurance, public liability insurance, and employer's liability insurance premiums are all allowable business expenses.
Accountancy and legal fees
Your accountant's fees, IR35 review costs, and any legal fees related to contract negotiations are fully claimable business expenses.
Pension contributions
Your company can make employer pension contributions on your behalf, which are a Corporation Tax-deductible expense and are not subject to personal income tax. This is one of the most tax-efficient ways to extract profit from your company.