Really confused about my expenses and what I can claim for

[tigwig]

I work with my husband, he is my assistant. HMRC recommended he became self employed as it would be more straightforward and told me I could 'pay him' a wage and claim that as an expense. He has a seperate account and a proportion of the fees which I worked out the amount on the additional children we took on when he started working with me. Is that right?
Secondly, we have a 7 seater car on business contract hire. We ONLY got this car for CMing but obviously use it on a weekend and during time off. I have been putting this down as an expense but working out a proportion of the monthly cost based on 5 days a week minding and only the weeks we work. Is this correct?
Finally, after numerous conversations with other minders who gave me so many more items/things I could claim for my expenses are coming in at two thirds of my income. Is this too much?
I have just been working out what its likely to be for next year and the income (for both of us) is about £27,000 with expenses being around £18,000. This sounds ludicrously high but I have the expenses of my assistants's 'wage' which has been around £200 per week now gone to £300 due to extra children. The car is also £312 per month (total amount not what I put through) and this adds up. We go to groups every day, regular soft play and eat out too (in supermarkets). I am now wondering if I have been putting things through that shouldnt have been. Obviously there is plenty of time to correct this if so.
Sorry if thats so long and I would really appreciate any help on this :)

[jillplum]

As long as you can justify the expenses according to the guidlines then no amount is TOO much. There is lots of info on here about what you can put through as an expense.

[MrAnchovy]

I work with my husband, he is my assistant. HMRC recommended he became self employed as it would be more straightforward and told me I could 'pay him' a wage and claim that as an expense.

You need to get this in writing from an HMRC status officer because the work of an assistant usually means they are an employee. Alternatively they can be a partner in your business which means that they are self employed, but you don't pay them a wage, instead you split the income and expenses of the business between you in an agreeed way (which can be a fixed sum or a proportion, often 50%). Is he actually registered as self employed, paying Class 2 contributions and completing a tax return?


Secondly, we have a 7 seater car on business contract hire. We ONLY got this car for CMing but obviously use it on a weekend and during time off. I have been putting this down as an expense but working out a proportion of the monthly cost based on 5 days a week minding and only the weeks we work. Is this correct?

You need to keep records of each business journey (date, mileage, where to/what for) and of total mileage. You can then claim the proportion given by business mileage divided by total mileage. The same applies for insurance, fuel and any other costs. Alternatively claim 45p per mile for the first 10,000 miles business use to cover all of these costs.


Finally, after numerous conversations with other minders who gave me so many more items/things I could claim for my expenses are coming in at two thirds of my income. Is this too much?

It is not too much if it is all allowable expenses. Examples of things that are not allowed but "conversations with other minders" often suggest they are include building work or garden work that is not maintenence especially new or replacement fencing, sheds or patios, anything spent on your own children including outings, groups and childcare while you attend training, anything that is covered by the 10% wear and tear allowance including carpets, curtains, blinds, sofas...

However there is no list of what you CAN claim - you can claim ANY expenditure that is incurred wholly and exclusively for your childminding business apart from a few statutory exceptions (mainly capital expenditure, although except for buildings this can usually be claimed as Annual Investment Allowance, and entertaining including gifts and parties for parents).

[tigwig]

I have nothing in writing from HMRC but was told on the phone on 2 seperate occasions to do it this way but after reading other threads doubted this was correct. I will speak to them again.
In regard to the car I havent been keeping any mileage record as I was told by other CM's you could claim either the cost of the car (a fair proportion for minding anyway) or mileage but not both. As the monthly cost of the payment outweighs the petrol they advised me to do it that way which I always have! Is this wrong?
With the other expenses there's nothing like building/garden work, just allowable expenses but a lot of them because we go out to a lot of places. I guess some of them arent always necessary but I take 2 or 3 children to the supermarket twice a week to get things and we have lunch in the cafe beforehand so I put their food down as an expense. We also eat tea out (cheaply) on most Fri and again I have been putting the kids food down for that as well. I presume this is classed as allowable?

[tigwig]

Forgot to add that yes my husband has registered as SE, is paying NI but has only been working with me since last summer so not yet completed a tax return.
Also just viewed the expenses downloads on here and it all follows what I have been doing so I'm fine with that its mainly the car thats the issue. In fact the bit about buying back childrens toys surprised me. I have re used £100's of pounds of my own kids toys for minding but had no idea I could put anything like this down!

[MrAnchovy]

In regard to the car I havent been keeping any mileage record as I was told by other CM's you could claim either the cost of the car (a fair proportion for minding anyway) or mileage but not both.

This is correct, but the only fair way to calculate the proportion for minding is to use mileage - HMRC will not accept 5/7 of the cost because you use the car 5 days out of 7 for minding.


I guess some of them arent always necessary but I take 2 or 3 children to the supermarket twice a week to get things and we have lunch in the cafe beforehand so I put their food down as an expense. We also eat tea out (cheaply) on most Fri and again I have been putting the kids food down for that as well. I presume this is classed as allowable?

Yes it is (for mindees, not for your own children).

[tigwig]

Right I see. I guess I've got a problem then as I've NEVER kept a record of mileage ever! Its something I can do for the next tax return but obviously previous ones its too late.
I truly thought that working out the days I used the car for minding would be allowed as it is only ever used through the week when I am working. I dont go out on an evening in it at all. If I hadnt have been a CM I would never have got it.

[Chatterbox Childcare]

Right I see. I guess I've got a problem then as I've NEVER kept a record of mileage ever! Its something I can do for the next tax return but obviously previous ones its too late.
I truly thought that working out the days I used the car for minding would be allowed as it is only ever used through the week when I am working. I dont go out on an evening in it at all. If I hadnt have been a CM I would never have got it.

If you are claiming .45p you know how many miles you have done.

Get your purchase invoice and this will have your starting mileage and take a mileage count at the end of this month. You can then work out the business mileage percentage from these figures. You can claim your business percentage of everything related to the car, petrol, interest on any loan, mot, service, repairs, valeting etc... You also claim the Capital Depreciation based on the cost of the car/business percentage and the % you can claim depends on the omissions of the car.

might be work a look at both ways but note once you start you have to continue with the method for the time you have the vehicle

[MrAnchovy]

Right I see. I guess I've got a problem then as I've NEVER kept a record of mileage ever! Its something I can do for the next tax return but obviously previous ones its too late.
I truly thought that working out the days I used the car for minding would be allowed as it is only ever used through the week when I am working. I dont go out on an evening in it at all. If I hadnt have been a CM I would never have got it.

I wouldn't lose any sleep over it - it will only become a problem if HMRC inquire into your accounts, which rarely happens. Even if it does happen there will be a discussion where you can make the case that what you have done is reasonable, and that doing it on a mileage basis wouldn't make much difference anyway.

[Koala]

claim for everything, write it all down and good luck, I doubt it will make any difference to HMRC as they don't care - your not making big bucks.

Avoid paying tax at all costs, we inadvertently pay too much as it is: VAT, prescriptions, council tax, etc... etc....

[bunyip]

You can find the milegae/vehicle use calculations in the following document. Call the HMRC Business Education & Support Team on 0114 29 69 431. Ask them to send you a free copy of "Childminders - information about tax and National Insurance 2012-13". Then make a note in your diary to get the new version before doing your next tax return. This helps with most areas of tax and NI.

As MrA says, I wouldn't worry overmuch if you miscalculated this first year. Since your first 'year' of trading will amount to only about 6 months' income, and you probably have lots of start-up expenses to deduct, you may well find yourself below the income tax threshold anyway. If not, then just content yourself with the fact that you'd be earning much more than many of us. :D

I wouldn't go out of my way to avoid tax. Aside from the possible consequences of being caught up with, I don't really have a problem with contributing to pensions, hospitals, schools, roads, etc. :thumbsup: