Do you run your own construction company and are unsure what expenses you can claim?
In construction, you can have many people in your ear saying what you can do, and it’s just confusing.
So, I am going to explain exactly the type of expenses you can claim for your construction company so you don’t get into trouble. Watch my video now, or read below.
Materials
We refer to these as direct costs because, let’s be honest, without materials, you’re not going to be able to complete the job.
So, the materials you’re allowed to claim for are anything directly related to the job you’re invoicing for. That could be anything like bricks, mortar, paint, wood, or anything that you literally spend on materials for that job.
Labour
Labour can come in two forms, it can be employed, where you’ve got regular team members that you run payroll for, and you’re deducting tax and National Insurance. And if they’re working on jobs for your clients you’re invoicing for, you can claim these in full.
Another way for labour is subcontract labour; this is really common.
Now you may pay them gross or deduct 20% from their labour, which comes under the construction industry scheme. But as long as these contractors or employees work on jobs you’re directly invoicing for, you can claim these.
Other direct costs
We’re based in Surrey, so if you’ve got a construction company that’s also in Surrey, but you’re doing the job, for example, in King’s Lynn, you will have to travel there. Whether you’re travelling on the train or you’re driving up there, then costs for travel are fully allowable as other direct costs. Also, it may be advantageous for you to stay there. So instead of spending three hours each way going there and back, getting a hotel or an Airbnb may be more efficient. And if that accommodation is located exactly close to where you’re doing the job, you’re invoicing for it is a legitimate expense.
Tools and machinery
They are fully allowable as long they directly relate to the income that you’re earning. So, you are allowed all if you need tools, plants and equipment for your construction business.
This is classified as an asset, and from a tax perspective, any money you spend on plants and machinery will typically get a 100% first-year allowance.
We’re coming towards the end of the super deduction era on the 31st of March, 2023. But as a general rule, if you’re spending money on plants and machinery defined as an asset, you will get 100% tax relief in the first year.
These are fully claimable, so make sure you are recording everything.
Memberships, subscriptions and Training
Some construction businesses, like electricians, have professional subscriptions to pay to be part of a professional membership body, which are fully allowable.
You will also need to keep yourself updated with training and keep up to date with current regulations. Any training courses that you go on that directly improve this are fully allowable.
Insurance
As a construction company, you’ll normally have three types of insurance: public liability insurance, employers liability insurance and potentially professional indemnity insurance.
A classic for this could be an architect; you would need professional indemnity insurance to trade in case of a mistake or negligence. And this will protect you and your business.
So, make sure that you’re claiming all of your insurance costs for your business and make sure that you’re protected at the same time.
Salary and dividend
Within your business, you, the director, are allowed to take your own salary out of the business. Make sure you declare this at least monthly and make sure that you’ve sat down with your accountant and got the proper advice; what is the appropriate salary level.
Many construction companies like you are currently taking money out of their business via a combination of a small salary and a dividend, but these also need to be discussed with your accountant prior to ensuring you are making your tax bill as low as legally possible.
Vehicles
A van is the most tax-claimable vehicle to have within your construction business. There are some conditions that need to be met, but as a general rule, you can have a van through your business.
If you have a car, unless it’s an electric car, you will get absolutely murdered, with benefit in kind tax and fuel taxes at the same time, so the tax relief that you will get through your company will be squashed, and you’ll end up paying more personally.
The construction business has a default rule; normally, go for a van because they are much more tax efficient.
Admin Support
You might have admin support within your construction business if you have an office, and someone who supports you on a day-to-day basis is fully allowable. And it’s only a matter of team, can be employed people that are working on admin with your office, they could be doing drawings, they could be doing marketing, they could be sales, as long as they are working directly for your business to build it and support it, these are fully allowable. Also, do not forget about your office costs, which could be rent, rate, lights, heat, and everything you would expect in running an office.
All these costs are directly allowed that you’re allowed to claim corporation tax relief for your construction business.
Trivial benefits
If you’re employing people directly for your business, you are allowed some trivial benefits that you’re allowed to give them.
This normally comes in the realm of Amazon vouchers, which could be a good tax-free way of giving your team an extra well done.
Small Overheads
Make sure you are claiming everything that is going through your business. Don’t forget about the small things like bank charges, interest, credit card charges, and petty cash. Make sure that you claim all the small overheads of your business. Otherwise, you pay for this from your own pocket.
It’s quite easy to record these because there’s digital software now where you can take pictures and directly upload these to your accounting software.
Annual team event
If you’ve got team members, you are allowed to claim an annual event for the team members to bring them together.
I find this really powerful, which we usually define as a team day that brings everyone together and gets everyone in the same vision, squash problems, squash where there’s a little bit of downtime, and takes on board how you then solve them and build all the things that you’re doing well. So annually, you are allowed an annual team event if you’ve got employees with your business.
Charity Donations
Another area to consider could be charity donations; there are opportunities for you to be able to make charitable donations through your business, and they get a full deduction of corporation tax.
What we do with all our clients here at MDH is we say come and talk to us. If you haven’t claimed something that you’ve come across, bring it to the accountant’s attention straight away. Sometimes things slip through the net, you may have paid something personally, and it’s gone. So, flag it with your accountants and make sure that they are claiming it within your business.
Also, if you are spending money in cash, keep all your receipts; otherwise, you are wasting money.
I hope this video has been of interest, and if I can help further, please click on my link below on Calendly and book a Zoom call or a telephone call.
I will take on board any questions you have, and there’ll be no pushy sales pitch!
