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Building 3 Chiswick Park, T: 020 3818 9530

OASIS 566 Chiswick High Road,


London, W4 5YA
F: 0333 014 2238
M: 078 0669 0596
shankar@oasisaccountants.co.uk
www.oasisaccountants.co.uk
ACCOUNTANTS

Expenses Guidelines for IT Contractors

Charitable Donations
Donations to charities can take the form of either personal contributions or through your company,
either of which can be beneficial in tax terms depending on how your finances are organised.

Personal Donations
If you donate to charity through your personal income, then you will be entitled to personal tax relief
if you choose to donate using gift aid. This means that the charity will be able to reclaim tax at the
basic rate from HMRC, which means that your net contribution becomes a gross contribution as far
as the charity is concerned. This effectively means that for every 80 that you donate, the charity
receives an additional 20 from the government, totaling 100 in all.
When you donate using the gift aid rules, you have to certify that you have paid enough tax to
cover the sum that the charity will reclaim from HMRC. If you have not paid enough tax to cover the
amount due to be reclaimed, then you will not be able to use gift aid for your donation.

Company Donations
If a company makes charitable donations from the businesss funds, then these sums are not subject
to corporation tax provided they are wholly and exclusively for the purposes of the company. The
charity must be made aware that the company is making the donation and the funds should be paid
directly from the business bank account.
To ensure that you get corporation tax relief on any donations your business makes then you will
need to ensure that the donation does not cause the business to make a loss for tax purposes, as
gift aid donations cannot be used to carry tax losses backwards or forwards. You will also need to
ensure that any director, their spouse or family members do not benefit from the donation beyond
the guidelines set out below:
Donation ValueBenefit Allowed
0 - 100 Up to 25% of the donation value
101 - 1,000 Up to 25
1,001 - 10,000 Up to 5% of the donation value
Above 10,000 Up to 500
There are certain donations which will not qualify for corporation tax relief, usually because there
are conditions attached which stipulate that there are to be repayments or purchases to be made
from the recipient or other affiliated individual.

Is it better to donate from the company or personally?


It depends on your specific financial situation, but generally the tax savings will only differ by around
1 per cent, so unless you are donating a significant amount, the tax efficiencies will be similar. A
specialist accountant will be able to advise you as to the best way to donate in your circumstances.

Shankar Devarashetty FCCA


Oasis Accountants is a limited company registered in England and Wales No.8359050. Registered as auditors in the United Kingdom by the
Association of Chartered Certified Accountants. VAT no: 163 3407 26
Annual Events
Annual company events such as Christmas parties, are considered an allowable expense for a
business, so long as the event meets the following criteria:The cost of the event must not exceed
150 per head, including VAT. Even if the total is just a fraction over the allowed amount, tax and
National Insurance will be payable on the entire cost, not just the excess.
All staff must be invited to attend, even if there is only one person working for the business.
Staff may invite their partners, but only if all staffs partners are invited and these invitees all count
towards the 150 per head allowance.
Receipts must be kept for the cost of all associated expenditure.
General recommendations are for events such as this to be limited to one a year, which is usually a
Christmas party, making it easy to keep to the 150 per head allowance an justify the expenditure.
A business that is using the Flat Rate VAT Scheme can only reclaim the VAT on the costs relating to
their employees, not the costs associated with their partners.
More than one event can be held each year and provided that the total cost doesnt exceed the 150
per head limit, there will be no taxable benefit incurred. If you do hold more than one event in any
given year, then you may need to demonstrate to HMRC that these are legitimate annual events as
opposed to ad hoc nights out for your employees.

Business Entertaining
Corporation tax relief is not available on business entertaining, so although you can claim the costs
through your company, they will not be tax deductible in terms of calculating your businesss profits.
If you are an owner-manager, then the lack of corporation tax relief doesnt necessarily mean that
it is not worth paying for business entertaining through your company bank account in preference
to meeting the costs personally.
In order to justify the cost of entertaining as a business expense despite the lack of corporation tax
relief, you will need to consider if the benefits received by the company will be worth the costs
involved. An outlay of thousands of pounds on a corporate box at a sporting event which will only
bring in hundreds of pounds worth of business is not a reasonable investment and may be considered
by HMRC to be an expense occurred for personal gain. However, buying drinks for your co-workers
on completion of a project for a client could lead to another contract in the future, so this would be
legitimately considered business entertaining.
Gifts to customers are not allowable as a business expense and would be treated as business
expenses unless they meet the following criteria:
The item in question costs less than 50
The item must advertise your business in a conspicuous manner
The gift must not be food, drink, tobacco or vouchers

Sponsorship
To be considered an allowable expense, the costs of sponsorship must be incurred wholly and
exclusively for the benefit of the business. Should you be the subject of an HMRC investigation, any
indication that the expenditure was incurred in your own personal best interests will not be viewed
favorably by HMRC. It is important to remember that sports sponsorship is not considered as a
charity donation it is a business expense, so there should be a demonstrable return on investment.
HMRC will often consider that a sponsorship has a non-business purpose where any of the following
apply:

Shankar Devarashetty FCCA


Oasis Accountants is a limited company registered in England and Wales No.8359050. Registered as auditors in the United
Kingdom by the Association of Chartered Certified Accountants. VAT no: 163 3407 26
If the person being sponsored is a personal friend or relative of any of the directors or
business proprietor
If the activity sponsored is one in which the director or proprietor has a personal involvement
which pre-dates the sponsorship
If the payment is requested by the recipient without any negotiation or consideration
No clear commercial benefit to the sponsorship, such as local businesses sponsoring events
taking place in other parts of the country

The ultimate test will be the purpose of the expenditure, as the success or otherwise of the
sponsorship will not be the only deciding factor. However, if the sponsorship doesnt have a
significant positive impact on the business, then it is reasonable to expect that attempts will be made
to try and make the arrangement more commercial viable in the future. Failure to do so could be
considered as proof that the arrangement was not solely for the businesss benefit.

For more information about what expenses you can claim as a contractor, please get in
touch with Your Dedicated Account Manager who will be happy to answer any of your
questions on his direct extension or on 020 3818 9530 or
email support@oasisaccountants.co.uk.

Shankar Devarashetty FCCA


Oasis Accountants is a limited company registered in England and Wales No.8359050. Registered as auditors in the United
Kingdom by the Association of Chartered Certified Accountants. VAT no: 163 3407 26