b.robson
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limited company expenses

limited company expenses

I have just started up a limited company as an electrician

My query is re tax

If I claim expenses from my company, I personally will receive 100% of the expenses with no tax liability.

If I don't claim expenses from my company, I then claim them on my self assessment tax return and effectively recover 20% from HMRC.

The best option would be to claim expense from my company.

Am I missing something ?

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23rd Feb 2016 18:51

Yes - what you're missing is that you may not be able to claim them on your self assessment return.  As an employee, you have an extra hurdle - the "necessarily incurred" test.

Also, if you claim them from the company, your company won't be worth as much.  If you're a 100% shareholder, that's effectively your money it's spent.

Assuming you can claim the expense on your SA return, it makes little or no difference to your overall wealth.  But it does depend to some extent on hows you extract the funds from the company - dividend or salary or whatever...

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23rd Feb 2016 20:08

My light fitting is broke. I have a spanner, a duck, some nails and a hairbrush. Am I missing something?

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23rd Feb 2016 20:37

Not trying to be funny but....
your company generates income and expenses. If the income is £100 and the expense (your expense claim) is £40 then the company will be taxed on the £60 profit. If its an employment expense like mileage paid within the allowable rates then the expense is tax free to you.

If you claim an expense through your self assessment ( do you have another self employment or employment income that is taxed under PAYE or CIS) then you can only claim back a repayment of tax if you have over paid tax. You have say employment income £15000 and tax deducted of £3000. You have a self employment with losses of £5000 then tax rebate would be £3000 (For example)

HMRC do not give you 20% rebates on expenditure just becasue you have incurred the expenditure.......its only a rebate of tax if you have over paid tax taking account of all sources of income and tax already deducted at source and a number of other allowances and reliefs.

You should seek the assistance of a local accountant as unless you know what your doing the filing of Ltd Co accounts and corporation tax returns may be a bit beyond you. Sparks for wiring houses and other electrical work and accountants/ tax advisors for accounts and tax return work.

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24th Feb 2016 09:53

Which tax ?

Or, put another way, you get a 20% tax repayment on the expenses you claim personally but the company pays extra Corporation Tax at 20%.

Which tax do you prefer to pay ?  Or aren't you fussed ?  Tax is tax .....

Obviously not quite as simple as that - Corporation Tax will drop to 19% soon and, come that day, I'd rather pay that.  But that's the general outline.

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24th Feb 2016 09:57

Yes you are misssing something

A suitable advisor!

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By Kevkava
24th Feb 2016 12:40

Why not speak to your son? He's had his own company, is an electrician, and will have appointed an accountant, and you know him better than anyone on here.

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24th Feb 2016 11:32

Good spot

Kevkava wrote:

Why not speak to your son? He's had his own company, is an electrician, and will have appointed an accountant, and you know him better than anyone on here.

:)

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