For IR35 purposes, expenditure falls into three categories:
- General administration expenses (Private Sector only)
An allowance equal to 5% of the total IR35 income is deducted rather than the actual cost incurred. This allows for the general expense of running a business, such as accountancy fees and marketing costs.
- Other expenses – including travel & subsistence
These are expenses which you could have claimed as a deduction if you had been directly employed by the client. For example, travel costs between workplaces, professional subscriptions and professional indemnity insurance are all allowable deductions.
Note: operating under IR35 will mean that your workplace is no longer considered temporary and as such, home to work travel is not allowable as a deduction.
- Capital Allowances
You’re only allowed to make a deduction for capital allowances where the plant or machinery bought is necessary for the performance of the contract within IR35. Examples include the cost of a computer or laptop.