"Can I claim the cost of food when I'm at work?"

There's been a change in the rules about what self-employed people can claim for the cost of food and drink when they're out and about on business.

The rules are different depending on whether you're employed or self-employed. In this article I'm going to talk about the rules for self-employed people. Be careful - if you're employed by your own limited company, you're an employee!

Nichola Ross Martin publishes excellent guides for both employed and self-employed people on her website here. The one for self-employed people is particularly helpful as it uses several different home-based businesses as examples (freelance lecturer, jobbing gardener, accountant). I'd highly recommend buying a copy.

Here's a quick summary of the new rules.

Before 6th April 2009, HM Revenue wouldn't normally let self-employed people claim the cost of food and drink when they were out and about on business, on the basis that "well you'd have to eat anyway". The only exception was if you were staying away from home overnight on business.

After 6th April 2009, the rules have changed, by statute. If you're self-employed and either;

• in a travelling occupation (e.g. long-distance lorry driver), or;
  
• making a journey for work that is only occasional, or not part of your normal pattern of business, or;
• staying away from home overnight on business,

then as long as you have the receipts to support the expense, you can claim for the cost of any food and drink you bought for yourself while you were travelling.

You can't claim any estimates or round-sum allowances for food and drink. Round-sum allowances apply only for employees.

More information is available via Nichola's website. Thanks to Nichola for allowing me to post this summary.

"What expenses can I claim?"

When you run a business from home, that's something you definitely need to know.

Can you claim tax relief on part of your mortgage, or rent? What about the running costs? Do you get any tax relief at all?

The answer is yes, you do - and my friend and fellow accountant Alan Young has explained it beautifully on his blog here.

Show Me The Money - excellent advice from KashFlow

Duane Jackson of KashFlow has just written a superb piece on his blog with some very useful tips to help you make sure your customers pay you on time.

I particularly like the last point:

Customers paying late are a real pain. So don’t forget that you are a customer too. If you expect your customers to pay you promptly, then make sure you pay your suppliers promptly.

I've read business writing by people who try and make their customers pay them yesterday, then don't pay their suppliers right up until the last minute, to keep the cash as long as possible. I don't like that.

I've dealt with one estate agent who used always to knock a percentage off his suppliers' bills when he paid them and argue it later if and when they noticed. Ouch ouch ouch.

Put it this way - having seen what he was like as a customer to his suppliers, I'd never buy a house through him. What goes around comes around.

The legal side of a home-based business

Picture the scene.

You've been made redundant from your job as a result of the credit crunch and have decided to turn your hobby - be that jewellery making, teaching French, or basket weaving - into a home-based business.

Great decision, because it means you're making money doing something you love. (I'm so much happier since I set up my home-based business. My husband's noticed that too.)

But when you're in business, you've got to think about so much more than if you were doing what you do, as a job.

If you were weaving baskets for an employer, all you have to do is - weave baskets. You don't have to find customers, pay bills, keep your books.

And you don't have to worry about whether your contracts with your customers and suppliers would stand up in a court of law.

If you're running a business weaving baskets, you have to do all of that.

So often, micro businesses don't put written contracts in place. Remember - a verbal contract's not worth the paper it's written on.

And then if your customer doesn't keep to your payment terms, could you sue them?

I would suggest thinking about that and talking to a lawyer.

But do remember that not all lawyers, like accountants, specialise in micro businesses. Many of them would charge you a huge amount and that's just what you don't need.

Try a service like Lime One (hat tip to Enterprise Nation for pointing me at them) that will give you "a template and minimal support" if that's what you want.

Thanks to Stefan for the tip to write this.

How complicated can a 4-page form be?

I visited another firm of accountants yesterday and during the meeting, we got to talking about tax returns. Sad isn't it.

We can remember the time when the shortest tax return was 10 pages long.

Now the shortest tax returns are 4 pages long.

Improvement?

Hang on a sec.

The guidance notes got longer when the return got shorter.

The 4-page return contains exactly the same information as the 10-page one. It's just that you have to add bits together to get the figures to go in the boxes on the 4-page form.

This is where it starts getting complicated. What figures should go in which box?...

I'm one of those people who thinks the UK's tax system is in serious need of simplification. Surely a form that has to be filled in every year shouldn't need a thick wad of guidance notes to fill it in.

And it's really scary that nobody in the winning team on University Challenge a couple of years ago could work out a tax credit claim correctly. If those bright sparks can't do it, what hope do the rest of us have? And that includes the staff at HM Revenue.

But until Mr Darling and co do make the form simpler, remember there are lots of friendly accountants out there who have done so many tax returns that we talk about them over coffee - and we're here to help YOU.