In challenging economic times like are happening currently, it can make sense for owners of small businesses to be sure they’re not paying more corporation tax than they could or should be. Fortunately, we’ve assembled a few tips we think are useful when you want to minimize your tax obligation.
PIEs, Subsistence, And Travel
Costs that get incurred in making any journey from your office on a trip that is business-related is something that is tax deductible. That might be the travel you do to meet a client, go to a training event, or even a trip where you buy some equipment for your company. Any of the following costs are things the business can reimburse and then deduct against their profits:
1) Fares for taxi services, buses, trains, and airfare
2) Tolls, the London congestion charge, and parking
3) Expenses for subsistence, such as getting lunch while you’re out
4) Meals and hotels when you need to stay away from your home; PIEs stands for personal incidental expenses, and 5 pounds are allowed per night for overnight domestic stays, and double that for anything overseas.
5) Mileage for personal vehicle use.
One interesting note is that PIEs don’t require documentation involving receipts and they can be claimed on top of meals and hotels. So, all you have to do is track how many nights you’re away plus the stated purpose of your visit in order to put your claim together.
What does all this prove worth to an average small business in London? If you have two client meetings offsite each week involving lunch inside London, you might save 300 pounds annually in tax savings.
If you ever have to use your own vehicle to handle business travel, then you can claim a particular amount for each mile in terms of tax deductions. Cars and vans get 45p per mile, and motorbikes get 24p per mile, although push bikes only get 20p per mile. When you get over 10,000 miles, the rates drop to 25p, 24p, and 20p. That’s a scary amount of cycling! If you do a pair of 5-mile return trips each week, you can get 100 pounds in annual tax savings and deductions.
You can claim costs for business calls only in terms of home telephone service. Sadly, you’re not able to claim rental costs, as that would be treated as a stated benefit in kind that gets taxed.
If you have a mobile phone with the account in the company name and the bills paid by the company, then you have no taxable benefits to worry about.
In terms of Internet usage, there’s no need to worry about taxable benefits if the account is registered under the company name and any private usage is not of significance.
What can all this add up for an average small business in London? Based on average costs for mobile phone use and broadband access, expect 100 pounds of tax savings each year.
Using Your Home As Your Office
If your home has an office area, you might be able to claim a rather modest amount as a tax deduction that is justifiable to the HMRC. Minor home office use could revolve around activities like doing monthly invoices or filing expense claims. In such cases, HMRC guidelines illustrate a few pounds per week. The company can reimburse this amount, reducing their tax bill. If you want more info then you can keep up with tax and vat news on this page.
On the other hand, if your costs are more significant, you might actually do activities at home that generate revenue. In such cases, your office has to be a specific business office that the HMRC can inspect as it pleases. The costs then would represent your costs of providing a home office. For instance, if you use a home office in a 5-room house, then you could charge 20 percent of your overall property costs.
Having said all that, you do have to be mindful that if this proves to be a large number, you might find your office sees exclusion from the principal private dwelling allowance you might otherwise enjoy. That could mean that if you sell your home, 20 percent might be subject to potential Capital Gains Tax.