As a subcontractor, you may be eligible to claim certain expenses as deductions on your tax return. It is important to know what are allowable expenses. All expenses incurred wholly and exclusively for business purposes can be claimed as a deduction from your gross income before CIS deductions.
Wholly and exclusively means that the sole purpose of the expenditure is for the purposes of your trade in the construction industry. This is not to say that a definitive part of an expense incurred for business and private purposes cannot be claimed. A dual purpose expense such as ordinary clothing, food and drink cannot however be claimed. “We eat to live not to work” is HMRC’s view. An exception would be protective clothing in the construction industry and exceptional meals and subsistence while working away.
These deductions can help reduce your taxable income and lower the amount of tax you owe. Some common examples of deductible expenses for subcontractors include:
- Loose Tools and Materials
- Subcontractors Costs
- Use of home as office
- Secretarial Expenses
- Accountancy Fees
- Rent, rates, light and heat when working away from normal place of business
- Travel and subsistence
- Motor expenses – Please maintain mileage records of business journeys.
- Telephone – Mobile and Use of Home
- Printing, postage and stationery
- Advertising and promotion
- Training and development
- Bank charges and interest
- Capital allowances on fixed assets
To claim these expenses on your tax return, you will need to keep receipts and other documentation to support your deductions. It is important to note that not all expenses are deductible, and the rules for what can be claimed as a deduction can vary depending on your specific circumstances. It is always a good idea to consult with a tax professional for more information on allowable expenses for subcontractors.
There are various methods of calculating the allowable expenses and proportions thereof. Please contact us if you wish to discuss this.
Please also note that it is a statutory requirement to maintain records of Income and Expenses of your business and keep records including Invoices and receipts. A simple format can be used and we can assist with this also.
If you work in the construction industry you’ll need to keep records of all your income and expenditure – whether you’re paid ‘gross’ or with deductions towards tax. If deductions are made you’ll need to keep your payment statements and – where higher rate deductions are made – the verification number. You’ll need these for your Self Assessment tax return to reclaim any overpayment of tax.