Internet access is a business essential for the majority of UK companies these days. Almost every industry, product seller or professional service relies on an online presence for marketing, making sales, and communicating with customers.
As such, broadband expenses are one of the most common costs claimed as tax deductible for limited companies and other organisations in the UK. However, before you make a claim internet tax expenses, you need to know the ins and outs of the HRMC rules concerning “Can I Claim my Internet Bill as a Tax Expense?” In our guide to how to claim internet on tax expenses, you’ll discover all the information you need to know.
Can I Claim my Internet Bill as a Tax Expense?
Not every business owner will be able to fully reclaim tax on their internet costs. So, it is essential to make sure your use of the internet for your business qualifies as a tax-deductible cost.
Whether you can claim tax back on internet costs will depend on how you use it and your broadband contract.
In order for your business internet to be categorised as tax deductible, you must be able to prove that your company’s broadband is being used exclusively for business purposes. Here is a quick breakdown of the factors to consider when it comes to claiming tax back on internet costs for your LTD:
- Business Use Only: The internet expenses you claim internet tax expenses for must be for a service that is exclusively used for business trade and purposes.
- Business and Personal Use: If you use your company broadband for both personal and business use, then you will only be able to make a claim based on the proportion of use that is related to your professional activities. To make a case to HRMC, you must keep and provide usage records to support your tax claim.
- Separate Business Broadband Line: It is often easier to make a case for reclaiming tax on broadband when you have a separate, dedicated broadband line for your business. This demonstrates that the internet service has been purchased in your business’s name solely for company use.
- Maintain Accurate Records: When you claim internet on tax expenses, you should keep accurate and up-to-date records of your bills and how you use your broadband for business. This will prove helpful if HRMC asks for further information following your claim.
- Home Office Internet: If you use the same broadband for your home office work and your personal use, you can include an accurate proportion of your internet bill as a business expense. Make sure that this claim is accurate based on the proportion of use for professional and personal activities.
- Professional Advice: Consulting with a tax advisor or accountant will help to ensure that you are HRMC compliant. You need a clear and accurate understanding of how regulations apply to your company to help your business to claim internet tax expenses without facing any audit issues later down the line.
Residential Broadband Business Use – Can I Claim my Internet Bill as a Tax Expense?
If you use your pre-existing residential broadband for business purposes, you may be wondering if you can start to claim internet on tax expenses. Well, you will only be able to make a claim back on this cost if you can prove to HRMC exactly which internet usage is for exclusive business purposes.
It can also be very difficult to prove any “extra business cost” to HRMC outside of what you were already paying for your personal use.
Tax Claims on Installing Broadband At Home for Your Business
Nowadays, finding a home without a broadband line is a difficult feat. But, in the unlikely situation where you don’t already have the internet at home and need to install it in order to work from home – you can claim internet tax expenses. This is because it represents a new and additional cost that you wouldn’t have to pay otherwise.
What if My Company Pays for My Residential Broadband?
If your residential broadband service is being paid for by your Ltd company, then both your business and you as an individual will need to pay extra tax. The amount you will need to pay will depend on the value of this “Benefit In Kind.” As a business, you will need to pay Class 1 NIC (National Insurance Contributions.” As an employee being paid for services through a benefit, income tax will be applied.
Can I Claim my Internet Bill as a Tax Expense – Mistakes to Avoid
Now that we have a clearer picture of the answer to “Can I Claim my Internet Bill as a Tax Expense?” let’s look at the common mistakes to avoid when you to how to claim internet on tax expenses. Here are the mistakes to keep in mind when you are getting your tax claim ready:
- Insufficient Record-Keeping: Make sure that you keep accurate records that are up-to-date and have all relevant receipts close to hand if required. Maintain usage logs if you are claiming business costs on a “dual-purpose” computer.
- Overestimating How Much You Use Broadband for Business: Make sure that you are not claiming a higher percentage of business usage than is accurate. Maintaining accurate records of your internet use will help you to avoid this pitfall.
- Having No Separate Business Broadband: By far, the simplest way to streamline the process to claim internet tax expenses is to have a separate line dedicated purely to company use. This demonstrates to HRMC that this is a clear business cost when you claim internet on tax expenses.
- Claiming Fully on Dual-Purpose Broadband Lines: Make sure you have a clear understanding of HRMC’s Duality Of Purpose and Benefit In Kind rules. Claiming for the full cost of a broadband line, which is also regularly used for personal purposes, could land you in hot water with HRMC if you are audited.
