Guide to Freelancing - PCG

Training
Where the purpose of training is to provide a business owner with new skills, the cost is treated as
capital and is not allowable for income tax. If the purpose is to update existing skills, then the
expense is allowable.
Where the IR35 rules apply, training expenses may be included within the five percent allowance
for general expenses but not claimed separately in their own right.
Telephone and internet
If a mobile phone is invoiced to the company, the full cost is allowable and there is no benefit in
kind, even if there is an element of private use.
If it is invoiced to the employee, then the benefit in kind is assessed on the portion attributable to
private use. It is helpful if you have itemised bills to prove the split between business and private
use. Note that the deduction is allowed only if you can identify a specific cost relating to the
business calls. For example, if the employee takes out a monthly contract with the telephone
company and pays £50 per month to cover rental and 100 “free” calls. If the bill for the month is
only ever £50, i.e. not all of the “free calls” are used; it will not be possible to claim anything even
if half of the calls are business.
The cost of broadband and other internet services is allowable, and if invoiced to the company
then incidental use by the employee does not rate as a benefit in kind. If the service is invoiced to
the employee and reclaimed, the element of private use by the employee may be treated as
earnings.
Insurance
Business insurances are allowable, as are life insurance, personal accident insurance, permanent
health insurance and private medical insurance for employees. A sole trader‟s or partner‟s own life,
accident, permanent health and private medical insurance expenses are rarely allowable.
IN A NUTSHELL: MONEY OUT
Keep business and personal expenditure separate
For expenses paid by a company to be allowable, the basic rule is that they must
be incurred wholly and exclusively for purposes of trade
You can‟t claim for entertaining clients, but if you have a limited company you
can give yourself a Christmas party, up to £150 per staff member.
Copyright PCG September 2011 Guide to Freelancing Version 7.0 44