In simple terms, expense is the money spent by an organisation for the purpose of business. In accounting, an expense is an outflow of cash or other asset of value incurred during a particular accounting period.
As a limited company contractor, you may incur various business expenses whilst undertaking your contract duties. Claiming all your allowable business expenses could reduce your corporation tax bill. It is therefore worth taking time to understand what you can and cannot be claimed as expense. Please find below a summary format showing how the corporation tax is calculated:
Turnover (Total of all invoices excluding VAT) XXX
Less: Tax allowable expenses (XXX)
Taxable profit XXX
Your company will pay corporation tax on taxable profits at the current rate of corporation tax which is 19%. The above format shows that higher the figure of allowable expenses will result in lower taxable profits and ultimately lower corporation tax payable.
Expenses – General principal
There are some basic principles which you should keep in your mind when claiming any expense as for business purposes.
Most commonly incurred contractor company expenses
To find out more about allowable business expenses or for any other information, please contact us.