The question of expenses can be intricate. Different types of expenses have particular taxation implications. In general, expenditure that is incurred wholly and exclusively for the purposes of business is allowable for Corporation Tax. These expenses are deducted from your company’s income and have the effect of reducing taxable profits, thereby reducing the overall amount of tax payable.
Although expenditure may be incurred by the business, there may be an element of benefit to you, the company director. This will have personal taxation implications as these items are considered by the Inland Revenue to be a Benefit in Kind.
Examples of Allowable Expenditure may include the following items.
Personal Goods Sold to your Company
It can be extremely advantageous for both you as an individual and your company to sell your personal office type property to your company, items say for example like computers, printers, desks, filing cabinet. You will benefit as all payments you receive from your company will be free of both income tax and national insurance contributions. The company will gain because it has acquired assets on which it can claim capital allowances, which reduce the taxable profits by the appropriate percentage costs of the assets purchased and resulting in corporation taxation savings. Low value items of £200 are allowable for corporation tax purposes in the year in which the payment was made for the asset.
Evidence will of course be required to support the selling price to your company. All transactions between your company and yourself as company director must be undertaken at what Inland Revenue term as “market value”. If an item is sold to the company for more than market value it will be taxed as a benefit in kind.
It is important to note that no VAT should be reclaimed on any assets you sell to your company.