Tax question - do I have to pay tax on expenses?

[evertonmint]

I'm trying to complete my tax return and flummoxed by the tax on expenses.

I am sole director of a limited company. This is the first year I've had to do a SA tax return in this position (previously just PAYE as employee of large company). My company reimburses me for any expenses I have incurred - e.g. train travel, entertainment, stationery, petrol. On my tax return it seems I have to list these and then pay tax on them. So basically I am not getting back all the expenses I have incurred???

My accountant is a bit snowed under and hasn't got back to me yet and I don't seem to have a P11D in their end of year paperwork they sent me so I am a bit stumped. I have about £1k of expenses.

I checked with DH who works for a large employer as to what he did on his tax return. He pays for travel, entertainment etc. all the time and then gets it reimbursed - way bigger sums than me. And his P11D shows 0 next to expenses so he doesn't have to pay tax on it.

Am I being daft to list these expenses in my return? It seems odd that I would have to pay tax on things that are just me subbing the company short term.

I know I should wait for my accountant to get back to me but just wondered if anyone here had an idea as to whether these need to go on or not so I can roughly work out my tax liability. If I had put these expenses on my company bank account debit card (forgot the PIN so never use it except for online purchases) then I would never have to pay tax on them as they wouldn't be expenses to be reimbursed to anyone, just operating costs, so it seems weird that I have to now. Have I just spectactularly misunderstood the tax return?

It depends on the expenses.

You are allowed to be reimbursed for travel within the course if your job but not for travel to & from your main place of work.

You are taxed on good/drink expenses unless it is necessary to entertain a client or you are lodging away from home (my company have an agreed daily amount we are allowed to reimburse tax free)

On your self assessment you will have to list these payments in as they need to know your turnover but you then put the amount of allowable business expenses & are only taxed on the profit.

Me and dh both equal partners in company.
our accountant takes off the allowable expenses and we are taxed on the net income.
However, anything above wages that are taken out of the company are classed as taxable income.
So obviously money can be taken out for personal use/ dividend but it is treated as income and taxed.
HMRC have a list of allowable expenses on their website.

Thanks. That makes it clearer. As it's a limited co the profit and tax is dealt with through company - I'm employed by my own co of which I'm sole director rather than being self-employed and doing it all through personal tax return. This is just my personal tax return. I get a couple of payments from co which I think I should be taxed on - paid £260 for use of home as office and phone bills paid (not just business calls). But travel to client office and entertainment (one meal with a client) are fair for me to be fully reimbursed I think.

Will wait to talk to my accountant but at least now I can put to him what I think I should list and check he agrees.

Thank you!

So you're paying for company stuff from your personal account and getting reimbursed via expenses claim?
Get a company credit/debit card and use that for company expenses like entertaining clients and travel to different sites. It won't help with this years return but it should help next near as you'll cut out the middle man (you) .

Yep - but my DH does this through work too (big company, no corp credit cards, fair amount of ent and travel) and has 0 expenses listed on P11D!

Have debit card but no PIN - shall rectify that straight away!

Still waiting for accountant. Gah! At least I know I am due a tax refund even if all these expenses go in :)

My understanding from my accountant was that business mileage is reimbursed i.e. no tax, food and drink only reimbursable if away from home and then has to be reasonable. Entertaining not reimbursable (which seems weird). You can then claim a small amount for business use of home premises but its only a few quid and hardly worth it.

Have you been taking a dividend or salary or both? I'm now set up as a limited company and am not looking forward to next years tax return with the complication of corporation tax first then dividend tax credits to faff with as well as a small amount of salary to keep up the NI. I shall be handing it all over to the accountant.

Minimum salary, rest as dividends. Accountant does it all :)

I only take dividends 3-4 times a year. You have to be a bit careful - e.g. taking the same amount monthly might raise a red flag as it's too like income then.

why did your accountant not sort your tax return?

I pay him to do my company taxes but not my personal stuff as it should be (and is) very simple once the company tax return is done as it's only salary and dividends and I don't have any other income. But forgot about this. I'd rather save the money for myself :)

but then why are you worrying about personal expenses - that is part of the company's costs, not the employees

That's what I didn't understand

Did you manage to talk to your accountant? The entertaining expenses are disallowed but that is either on the company or on you so only by talking to the accountant will you be able to decide how to treat.

Accountant meant to be calling me tomorrow so should get it sorted then! Thanks all.

They should have gone on your p11d - unless the company has a dispensation covering them (which your dh's employer probably has), and you then put them on your tax return and also claim them as necessarily incurred in the course of your employment - so an + and a - netting of to no effect.