IT Contractor Tax Limited Company Accounts Accounting

Independent Contractor Services
Free IR35 & Contractor Tax Review
Call free 0844 259 0025 | Email

IT contractor expenses - what can you claim for?

Posted Feb 11, 2009

IT contractors are allowed to claim back expenses they have incurred during their business duties. This article looks at some of the most common expenses you might incur as a contractor.

The golden rules for expenses is that you can only claim for expenses you incur wholly and exclusively in the course of your contracting work.

There are many 'grey areas', so you should always check with your accountant if you are unsure about the validity of your expense claims.

These expenses are likely to apply whether you operate via a limited or umbrella company.

Typical contractor expenses

- Professional fees, such as your accountant or solicitor.
- Your salary (and spouse, if applicable)
- Business insurance, e.g. PI cover, public liability, tax investigation
- Computers, laptops, other equipment
- Cost of business phone calls, broadband
- Business travel and accommodation costs
- Executive pension contributions
- Subscriptions to professional magazines
- Cost of postage, stationary
- Travel expenses
- Accommodation expenses (and subsistence)

IR35 and the 5% allowance

If you are a limited company contractor, and your contract work is caught by the IR35 rules, you are provided with a fixed '5% allowance' which is intended to cover administrative expenses.

This expenses allowance is a flat rate deduction of 5% of the gross fees receivable for any relevant contracts.

You can find out more about the '5% allowance' in our dedicated article, IR35 deemed payment and the treatment of expenses.

You may also wish to refer to the IR35 expenses FAQ on the HMRC website.

Final considerations

You should always ensure that any expenses you claim are genuine and were incurred solely for business purposes, and you should always keep receipts for any expenses you claim.

If you're in any doubt, ask your accountant for advice.

Please scroll down for related articles

Contractor Services


Related Articles

Contractor accountant warns over illegal dividend declarations
A leading contractor accountant looks at the rise in illegal dividends reported in recent months, and how limited company contractors should take care when making dividend declarations

Limited company directors warned over illegal dividends
A leading accountant says that the number of company directors taking illegal dividends or loans has risen at a rapid rate.

Limited company dividends - how much tax to pay?
If you are a limited company shareholder, how do you calculate the personal tax payable on dividends you receive?

IT contractors and Capital Gains Tax (CGT)
Following the Emergency Budget, many contractors will be aware that the higher CGT rate has risen to 28%, effective from 23rd June 2010.

What is entrepreneurs' relief?
If you sell all or part of your business, or its assets after trading as ceased, you may be able to claim entrepreneurs' relief on the proceeds and pay 10% instead of the standard CGT rate.

What can contractors expect from the 'emergency budget'?
The most eagerly anticipated Budget in decades is likely to contain significant changes to most areas of business and personal taxation. What can contractors expect on June 22nd?

Online accounting for contractors - what to look out for
As more and more contractors turn to web-based software to manage their accounts, we look at things to consider when choosing an online accountancy provider.

Coalition government - the tax consequences for contractors
What are the likely tax consequences for contractors and small businesses following the creation of a Conservative / Liberal Democrat coalition government?

P35 'service company' question for limited company contractors
The 'service company' question on the 2009/10 P35 employer annual return could cause limited company contractors some confusion once again this year.

How much should limited company contractors set aside for income tax?
For contractors deriving dividend income from their limited companies, how much income tax should they put aside?

Changes for VAT registered contractors from 1st April 2010
Any contractors registered for VAT should be aware of a number of changes to the VAT system, which take effect from 1st April 2010.

Income tax rates and taxable bands - 2010/11 tax year
The income tax rates and bands for the 2010-11 tax year, including the new 50% rate, the gradual personal allowance removal if you earn over six figures, and the new 42.5% dividend tax band.

Contractor tax records - how long should you keep them for?
HMRC has released a new guide explaining which tax and accounting records contractors should keep, and how long they should keep them for.

BN66 - an overview of the offshore tax avoidance rules
In March 2008, the Chancellor announced a crackdown on the 'abuse' of loopholes in the double taxation treaties which exist between the UK and other countries. An overview of BN66 in light of the recent Huitson/Montpelier High Court case.

Contractors urged to file tax returns online by Sunday 31st January
HMRC has reminded taxpayers that they need to complete their annual self assessment tax returns online by 31st of January, to avoid paying a penalty.

Qdosconsulting