Running your own Limited Company: Travel Expenses

If you are a contractor working through your own limited company and are outside IR35 then life is very simple. HMRC rules state that expenses can be claimed provided they are wholly and exclusively for the purposes of your business. This means you can claim various valid expenses, writes Chris Deakin, Operations Manager for Intouch Accounting.

For travel expenses you can claim the cost of travel to and from your contracted place of work. Mileage rates are 45p per mile for the first 10,000 miles in any fiscal year and then 25p per mile thereafter. This allowance is to cover fuel and running costs of the vehicle. If you are travelling to work as a passenger in a car you are entitled to claim 5p per mile. You can also claim for parking and the congestion charges but you may not claim for parking fines or speeding fines. The cost of travel by public transport can be claimed but you must have a valid receipt. A mileage allowance can also be claimed for travel by motorcycle and bicycle at rates of 24p per mile and 20p per mile respectively.

It is important to keep receipts for your travel expenses or a record of any journeys. When claiming travel expenses it is advisable that you keep a note of the dates, reason, locations mileage, type of transport etc. Basically a record of travel will provide supporting evidence if required at a later stage.

It is advisable to hold onto your receipts because although your accountant will not need to see them, the Revenue, if they choose to investigate, can go back as far as six years.

If you are inside of IR35 travel expenses can also be claimed (depending on the circumstances of the contract).

HMRC looks at travel expenses claims on a case-by-case basis in relation to rules it introduced on April 6th 1998. As this downloadable guide makes clear, the broad aim of the rules is to grant (with certain restrictions) home-to-work travel expenses for those workers who, within their employment, work at a succession of temporary workplaces.

As you might expect, the taxman does not allow unrestricted relief (see the section on the 24-month rule) and a workplace cannot remain temporary indefinitely. However, it is the status of the workplace, within the employment, that is the determining factor as to whether your travel expense is allowable in the eyes of HMRC. Knowing your workplace’s status, and being careful to avoid the anti-avoidance mechanisms at play, can ensure your travel expenses continue to qualify and should help keep a cash-hungry taxman from your door.

The travel rules that I have been describing apply equally for travel abroad. There are also extra reliefs that may be available. This is more of a specialised area and if you require further information then you should seek advice from an accountant. However there are worldwide subsistence rates that HMRC allow to be claimed, these can be found online here:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/781249/Worldwide_subsistence_rates_effective_6_April_2019.pdf 

You can also find more information on contractor expenses here.