As a recruitment agency, understanding the costs that you can claim through your business is essential for effective financial management and maximising your business expenses and profitability. By taking advantage of allowable business expenses, you can reduce your tax liability and free up resources to invest in growing your agency. In this blog post, we will explore the common costs that recruitment agencies can claim as legitimate business expenses, helping you optimise your financial operations and improve your bottom line.
Office expenses are among the most common costs that recruitment agencies can claim. This includes rent for your office space, utility bills, internet and phone services, office supplies, stationery, furniture and IT equipment. Keep in mind, if you are providing mobile phones to Directors and employees the phone contract must be in the company name. If the phone contract is personal then you will only be able to reclaim the cost of business calls.
If you work from home then you can claim a proportion of your household costs (based on the number of rooms in the property and the percentage of time spend in the office area). Alternatively, you can claim a fixed £6 a week for home office costs without the need to provide receipts.
Marketing and Advertising:
Recruitment agencies heavily rely on marketing and advertising to attract clients and candidates. Costs associated with marketing and advertising activities, such as website development and maintenance, online job postings, LinkedIn licences, social media campaigns, and promotional materials, are generally considered deductible business expenses.
If your recruitment agency requires travel for client meetings, industry conferences, or candidate interviews, the associated expenses can typically be claimed. This includes transportation costs, accommodation and a reasonable food & drink expense. Ensure you keep detailed records of mileage and receipts to substantiate these claims.
HMRC’s standard mileage rates for employees using their personal car for business trips are as follows:
- For petrol cars the mileage rates are 45p per mile for the first 10,000 miles and then 25p per mile after.
- Electric cars have a different mileage rate of 8p per mile.
- Motorbikes are 24p per mile and bicycles are 20p per mile.
A company does not have to use these rates. Where a rate lower than the above is adopted, the employee may claim the difference as a deduction from taxable income and obtain a tax refund. Where a rate higher than the above is paid, the employee may suffer a tax and National Insurance charge. If the employee is using a company car then different mileage rates apply and are dependent on engine size. These rates are reviewed on a quarterly basis by HMRC.
The company can purchase or lease a company vehicle. However, there are tax implications of offering this benefit to an employee (including a Director) such as Benefit in Kind (BIK) tax. BIK tax is currently lower for electric vehicles, making this quite an attractive option for some business owners. We recommend you seek professional advice before making any car purchases.
Client, candidate and supplier entertaining costs are not tax deductible expenses. Where an employee pays entertaining costs on behalf of the company, the employee may reclaim those costs from the company. The company will not be able to make a VAT reclaim, nor will it get a corporation tax relief on the expense. Small incidental costs such as buying a cup of coffee when carrying out an off-site candidate interview are allowable.
Staff entertainment is different. Currently a company can spend up to £150 per employee, per annum on annual staff events. Any spend in excess of that amount will attract benefit in kind charges on the attending employees. The company can enter in to a PAYE Settlement Agreement whereby it settles the tax and National Insurance costs on behalf of the employees.
Employee-related costs, including salaries, commissions and bonuses, are essential business expenses that can be claimed. This also includes employer contributions to pensions, health insurance, and other employee benefits. Ensure that you keep accurate records of all employee-related expenses, including payroll taxes and National Insurance contributions.
Training and Development:
Recruitment agencies benefit from investing in the training and development of their team. Costs associated with employee training programs, conferences and workshops are generally considered legitimate business expenses. These expenses contribute to enhancing the skills and expertise of your team, ultimately benefiting your agency’s performance.
Professional Fees and Memberships:
Recruitment agencies often seek professional services and memberships to stay up to date with industry trends and regulations e.g. APSCo or REC. Expenses related to professional fees for legal, accounting, or consulting services, as well as memberships in professional associations or industry-specific organisations, are generally deductible.
Software and Technology:
Recruitment agencies rely heavily on technology and software tools to streamline their operations. Costs associated with applicant tracking systems (ATS), candidate databases, CRM software, and other relevant tools can generally be claimed as business expenses. Additionally, website hosting and domain registration costs can also be considered.
It can be a minefield in understanding what costs you can and can’t claim through your business so keep in mind for an expenses to be legitimate as per HMRC’s definition then it must be incurred “wholly and exclusively” for the purpose of the your business. Remember to keep detailed records and always consult with a qualified accountant or tax advisor if you’re unsure. For a more in depth exploration of these expenses, download our ‘A Guide to Limited Company Expenses‘