An allowable expense for your Recruitment Agency is a business expense that is incurred for the purpose of your trade and they have the effect of potentially reducing your taxable profit (and so your tax bill) when you reach the end of your financial year.
But, what can you actually claim for? Here are a few things that may help reduce your tax bill:
You have to network and let people know your business exists, so any marketing you do and business cards you print are fully allowable.
Computer & Equipment
Any equipment you buy such as desks, chairs and computers are fully allowable and may even attract capital allowance (or Annual Investment Allowance). So, if cash allows, get your office set up so you have all the equipment you need.
All work phone calls and the cost of your handset is allowable for tax purposes. However if you use the phone for personal calls your accountant may advise making an adjustment for the personal element, since they are not a business expense and therefore do not attract tax relief. Just hold onto the bills so your accountant can take a look and advise you.
Meeting clients and building new relationships is a major part of running a recruitment agency and the rules as to what is allowable travel depend on different factors. Seek advice from a qualified accountant to talk about your specific situation.
If you are based from home, then your travel to clients will be claimable along with any subsistence (lunch, coffees etc). Keep your tube tickets or download your oyster statement if you use public transport. If you use your car the simplest way to claim for your travel is by claiming mileage, currently at 45p per mile for the first 10,000 miles and 25p thereafter.
If you have an office then it is worth noting that travel to/from your office and home is not tax allowable. However if you need to travel to your clients during the day, then this travel may be claimed.
In either situation, just keep a note of your travel expenses and where you have been and ask your accountant to check it for you.
As with travel, this is another area we advise seek advice from a qualified accountant who understands your specific situation. Entertainment falls into two categories:
Client Entertainment – you can pay for entertaining your clients from the Company bank account however you cannot deduct the cost of this from your taxable profits or for VAT purposes. Unfortunately HMRC have taken a somewhat black and white approach to client entertainment and this means all client is disallowed, no exceptions. It is worth noting that although you will not receive tax relief you can use Company money, so always claim back these expenses to avoid you being out of pocket or having to extract additional salary to cover these expenses personally.
Staff Entertainment – unlike client entertainment, some reliefs are available for staff entertainment. There is an annual allowance, currently £150 per head, for staff events throughout the year. In addition to this annual amount your Company Christmas Party will be an allowable expense. But don’t forget these staff events must be open to all, not just Directors.
Subscriptions and Membership Fees
You need the right business tools so things like LinkedIn Recruiter or Monster for Employers as well as any magazine subscriptions you may are tax allowable.
Use of Home
If you are a new business you may not feel ready to take on the overhead of renting an office so have chosen to work from home. There is a flat rate deduction available, currently £4/week, that you can claim against your profits. It’s not much, but every bit counts towards reducing your tax bill.
You may have needed to taken legal advice to make sure you have the right terms and conditions in place. Again, these are fully allowable along with the cost of your accountant!
Bank Charges and Interest
All bank charges for fully allowable. This includes any fees your bank may have charged for setting and using facilities such as loans, overdrafts or invoice discounting.
Remember, if you are in doubt just keep hold of your receipts as you incur costs running your recruitment agency. It’s always a good idea to find a fully qualified accountant who you can build a long term relationship who is on hand to help you work out what expenses are allowable and also understands your business.