eCommerce Businesses: Are You Missing Out on Tax-Deductible Expenses?
eCommerce in the UK is expected to be worth 222.5billion euros by the end of 2020, a surge of almost 11% compared to last year. With the opportunity to buy almost anything online, from clothing, food or electronics to holiday accommodation and medicine, it's no surprise that the UK is the largest B2C eCommerce market in Europe.
Despite over 750,000 businesses being forced to close their doors under the new restrictions, Covid-19 has sparked a retail transformation in the UK.
Businesses in every sector have had to adapt to meet the growing needs of online shopping, and research shows that millions of people have been shopping online for the first time during the lockdown.
With this trend set to continue long after lockdown, many have started selling direct to customers via online channels for the first time, with over 85,000 businesses launching online stores or joining online marketplaces in the last four months.
According to RetailX’ analysis: the most popular goods are that are purchased online in the UK
Have you joined the eCommerce world?
Tax-deductible business expenses can contribute greatly to the growth of your eCommerce business, so taking time to understand which expenses can be claimed could save you a small fortune.
There are many different expenses you can claim for as an eCommerce business compared to a physical store - keep reading for a list of expenses you may be able to claim - and as always, make sure you keep a record of your receipts and invoices!
- Using your home as an office
If you use your home as an office, it should be possible for you to claim deductions.
There are a few ways you can do this, including claiming for the costs of converting space in your home into an office (and any future repairs for your home office are 100% deductible).
Alternatively, you can claim a proportion of the total costs of running your home, or you can charge your business a fixed rate deduction of £6 per week, which is an allowance of £312 per year for 2020/2021. This can be included as an allowable expense alongside anything else you are claiming for.
- Rental or homeowner insurance
- Rent or mortgage payments
- Mobile phone bill: for the portion you use your mobile for customer service or other business purposes
- Bank and credit card fees
- Business Insurance: such as public liability insurance
- Mileage expenses: read more about this here
- Accommodation and subsistence: read more about this here
If you store the goods at your premises and physically post them out to customers, you may incur additional expenses that you can claim the tax back for, such as:
- Office supplies: including paper, boxes, tape, ink
- Delivery costs: including postage, packing, envelopes
As an eCommerce business, you will likely incur costs for advertising your business online and running your website - which is essentially your shop window. You can claim tax relief on expenses incurred here including:
- Website related: domain names, hosting, plugins, photos for your website, subscription services that support you in running your business such as Xero
- Marketing related: Google Ads, Facebook adverts, sponsored ads or sponsor fees for influencer content, digital and print publications, email marketing software such as Hubspot
Over 96% of our population is due to be online this year, with over 85% of us making a purchase online last year. There has never been a better time to join the world of eCommerce!
Do I need to register my eCommerce business for VAT?
Whether you sell online or from a physical store, the threshold for VAT registration is the same. Once you reach £82,000 turnover in any 12 month rolling period, you'll need to register for VAT and start charging VAT on your goods (usually 20%).
The rules apply to almost all goods and services, with some exceptions such as e-books - they have a completely different set of rules.
Why is a good expense management process essential for claiming tax relief on business expenses?
Conventional expense management methods are time-consuming and inefficient, prone to human error and don’t give complete visibility of spending. If you lose paper receipts or invoices for your expenses piling up through the year, you won't be able to claim tax relief on them - it can quite literally cost you money.
With the right tools, expenses are simple.
Expend is an all-in-one expense management platform. Accessed via a smart mobile app and dashboard, Expend makes expense management quicker, easier and more accurate than ever before.
Every time a reclaimable expense is incurred, it is crucial the associated receipts and invoices hold the right information. With Expend's cutting-edge OCR technology, you can scan any invoices or receipts, creating expense claims quickly and accurately.
You also have the option to use Expend’s business Mastercards, capturing accurate transaction information instantly, right at the source — meaning there’s no chance of errors causing a problem further down the line.
There's also the advantage of reducing paper waste. Everyone wants to help the planet and with online expense software that allows employees to submit their expenses digitally, you can streamline a traditionally paper-intensive process whilst helping to reduce your waste - a win-win situation.
We know you don’t want to spend an excessive amount of time recording every single detail of every expense (who has time for that?!) so get ahead and start your 30 day free trial with Expend today.
> Don't just take our word for it. Read our latest customer reviews here!
Written by Kayley Hunter
As head of partnerships, Kayley can be found working closely with accountants and leading accounting apps to help solve the expenses and spending problems faced by businesses through lasting partnerships.