Hi! So glad I've found this forum! I have recently started work for a new client, he is a sole trader and works from home. Hejaz just given me his receipts from the beginning of trading and has included stacks of receipts for dinners and lunches with clients, as I understand it from HMRC this is not an allowable expense? Is this correct? My client has also submitted receipts for client train fares and tickets to exhibitons also, is this still classed as entertaining clients d non allowable? My client is involved with overseas property and is alsotrying to claim for his recent holiday to Florida, this trip was not wholey and exclusively for business purpose, he also believes he can claim for the people that traveled with him....
As you can see im having a slight nightmare and couldreally do with some advice!!!
Many thanks,
Stacey
I think most clients assume that the companies money is to some extent their own to do with as they please. Glad to see that you realise that something is amiss here.
HMRC's take on entertaining is basically that entertainment of business acquaintances wont count as business related if its purpose is really social. Even if theres some discussion of business topics in the course of the entertainment.
depending upon the legitimacy of the client entertainment the dinners with clients would be included in the accounts as entertainment expenses but such would not be allowable for tax purposes except in a very very specific circumstances related to entertaining overseas clients.
Similar situation with the exhibition tickets and travel for clients. The expense would appear to be incurred for the business but would not be allowable for tax purposes.
Lastly overseas travel by the director is likely to be legitimate and allowable considering the nature of his business. However, such does not extend to freinds and family. In this instance I would assume that the airfare for the director alone would be an allowable expense but the others that travelled should be accounted for under the Directors Loan Account as such was nothing to do with the business.
It's a bit late at night and no doubt I'll wake up in the morning realising that I've missed something out here but for now, I'm in general agreement with you in that virtually nothing in your list is allowable for tax purposes with the possible exception of the airfare for the director (only).
Sure that Phil, Nick or Bill will put my answer back on the straight and narrow in the morning if I've led you astray.
Oh, and welcome to the forum.
all the best,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
2. Client train fares and exhibition costs - not allowed if these are the costs of the customer/supplier. But if they are costs of your client then would say they are allowed ie travel costs to go to meetings and exhibition costs provided they relate to business.
3. Trip to Florida - if not wholly and exclusively for business then none can be claimed.
I can see confusion arising over "client". There are two different types of client in the posts above - the client of the bookkeeper and the clients of the client of the bookkeeper.
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Never buy black socks from a normal shop. They shaft you every time.
If the expenses are wholley and exclusively for business purposes, then they may be entered on to the accounts for financial accounting purposes but would be removed from the tax calculations.
Would agree with all the other comments
Bill
-- Edited by Wella on Wednesday 1st of June 2011 09:57:20 AM
Thank you for our replies, it's so helpful. So just so I'm clear, he cannot claim for his lunches with clients etc on his tax return? Would such things be entered into the drawings account?
Also, he can claim for his train tickets, but not for his clients? And his entry to exhibitions, but not his clients?
His trip to Florida was not wholly and excessively for business so therefore he can claim nothing for this trip?
So if something is paid from the business but the business does not depend on that expense being paid, does this get accounted for in drawings and therefore not included on the tax return?
Sorry it's a million questions, I just want to be armed with th right ammo when I return his books.
I think you got the jist of what everyone has said. The only thing I would add, is he may be entitled to "subsistence" - but only if this is if the receipt does not include paying for anyone else. Obviously if there is a hotel bill (for himself) attached he can claim it. Otherwise he will need to be able to justify why it was wholly and necessary for the business for him to need to not return home (his place of work) to eat. I don't think convenience is a reason!
He has no reciepts for hotel stays, purely reciepts for meals, snacks, drinks etc. Some when he's with clients and some alone. What would I class as subsidence?
Subsistence is usually an amount to provide with meals when away from normal place of work. One of my clients is a touring theatre company and they are allowed subsistence of £14.50 per day (if breakfast is included in the accommodation) or £21 per day if it isn't. This is an equity rate and allowable under HMRC rules.
If he is away on wholly and exclusively on business, yes he can claim a reasonable amount of lunch eg sandwich and drink etc not a slap up meal, and yes just for himself. It it's just a day working at the office, no.
Mmm, when we are talking about meals when you are just out of the office for the day rather than suffering some major inconvenience due to work then I would actually say no. However, others may disagree with me and there are exceptions to every rule.
HMRC thinking on this is that eating is part of staying alive, it is not something incurred wholly, exclusively and necessarily for the purposes of the business (although try to get any work out of a dead director!).
For example, if the director was not away on business would he not have bought himself the meal anyway?
If the directors answer is that he would not have bought himself such an expensive meal then he's just sht himself in the foot.
The cost of food or drink consumed for the human requirement of sustenance is not allowable. It does not matter that work occasions a greater appetite or causes greater expense. The expenditure is at best dual purpose. There is no mechanism to allow an apportionment to give a business proportion or the extra cost imposed by the business. The whole cost is disallowed.
There are some different rules for long distance lorry drivers, entertainers and where directors need to live away from home for a period of time due to work but for working away during the day I think that subsistence payments are a non starter unless you have got a prior dispensation from HMRC.
One thing to ask yourself. If the director had to speak with HMRC do you think that he would be comfortable telling them that he was claiming for meals!
Good luck with this one and don't worry about asking too many questions. There is a lot of caselaw around this area that often seems to lack consistency so even amongst ourselves often there are different views on what is allowable and what is not.
For this one, as detailed above I'm firmly in the not allowable camp.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Shaun we posted almost simultaneously and kind of agreed. Where I veer away from you is on the being away in that you say "would he not have bought his meal anyway" well no he may not have done - he may have taken sandwiches or a salad made at home in to the office or if he worked from home he may make himself his lunch. He wouldn't do this if away because he would not be able to keep it in good condition (ie refrigerate it).
replace my would he not have bought a meal anyway to would he not have eaten anyway.
the logic being that no matter how the director found sustinence it was an act of keeping himself alive, not a cost incurred wholly, exclusively and necessarily in the pursuit of the needs of the business.
HMRC is not really concerned with whether one is able to keep their sandwiches fresh (I mean, which of us hasn't in our time eaten sandwiches on a school trip that have been sweating away in a plastic bag all day). Their logic is simply why should their tax revenue be reduced in order for you to eat when you would be eating anyway had you not been off site on business?
I actually agree with them on this one.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I can also see your logic, however, if you are being forced to be away from home for business reasons you should be compensated for that fact. Yes you have to eat wherever you are but being away from home can be more costly to eat and we are only talking about the cost being tax deductible.
which of course goes back to the quote taken from BIM37660. Re the case of Caillebotte v Quinn [1975] :
"The cost of food or drink consumed for the human requirement of sustenance is not allowable. It does not matter that work occasions a greater appetite or causes greater expense. The expenditure is at best dual purpose. There is no mechanism to allow an apportionment to give a business proportion or the extra cost imposed by the business. The whole cost is disallowed".
Which clearly states that it does not matter that such causes greater expense.
Whilst I agree that there should be compensation for working away from home, such is not the responsibility of the inland revenue to provide such compensation.... OMG think that I've been reading too much Milton Friedman!
Where's Bill when we need him, he loves these debates when they get all techie and we start debating about where the full stop falls in an HMRC paragraph! Bet he's got a counter to BIM37660 that he's been holding onto for just this scenario and he's missing it.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Bump - as this is a good discussion and has been raised in another thread.
Funnily enough I have just emailed my tame accountant to ask him how he wants this sort of thing treated in the books for my client. I only go up to Trial balance, so as it is him who will be sorting out the tax / compliance / year end I think it's best to have their steer first.
My take is the same as Shaun's though - if 'away from home' on business involves overnight stay then can claim small subsistence allowance for self only. Other than that not allowed for tax deduction purposes.
please read the thread fully before commenting. The initial question stated the facts and some very knowledgable bookkeepers have commented on the scenario.
I appreciate that English is not your first language and, as you wrote in another thread, that you have no experience at all of bookkeeping.
Whilst you study the subject it might be a good idea for you to view the posts and ask questions rather than attempting to offer people any advice. At least one of your posts has given completely the wrong advice (the one about bank and cash) after a correct answer had already been given.
At the moment your userid is very close to being revoked and IP address banned but that's because we cannot quite determine whether or not you are merely a spammer rather than someone wanting to learn bookkeeping.
I hope that you take this post in the manner in which it is intended.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Adam made five more posts after the above and associated warnings that I have given. These posts were a mixture of dangerously incorrect advice and uneccessary responses which added nothing to the threads in which they appeared (such as "good idea keep it up ").
I have deleted most of Adams responses, deleted the contents of a few and left a couple which were responded to.
I have also banned his IP address as I believe his posts to be the forerunner of a spam attack which could be achieved by adding a link to signatures. If I left it longer I would just be increasing mine and site admins workload in clearing up the site later.
Adam. If you are reading this and disagree with my judgement please raise your concerns with the Site Admin team who will make the judgement on whether to reinstate permissions for your IP address.
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
In it, it states that modest expenses can be deducted from business profits.
I allways thought the basic premise was that you "eat to live not to work"? However HMRC would accept reasonable expenses if away overnight.
From my, hazy, memory wasn't their a case involving a plumber who was claiming for sandwiches when he worked more than 10miles from home? Maybe things have moved on
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Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
Just picked up on this very interesting thread from a new one that was linked and find this all rather amazing and indeed very interesting.
I am doing the "bookkeeping" for our own small business and have learnt volumes from posting and more importantly reading posts on this very informative forum (that was me sucking up as I don't want to be flamed for the following :) ).
Having worked in the past for some pretty large companies and as luck would have it, in positions that involved large amounts of travelling both in UK and in many parts of the Globe, I find the idea that HMRC would deny my Starbucks coffee or M&S sandwich whilst out on company business as a justifiable expense??
I am now posting from Shanghai, well actually Suzhou, near Shanghai and currently as the owner/director of the business will charge the company for every coffee, tea, sandwich, or steak dinner whilst in Asia and have done so with every company I have worked for over the past 25 years.
Are you guys/ladies, who know a lot more than me of HMRC rules actually saying these expenses are NOT allowable against tax for the company???
I mean, if I were at home in UK I would eat a sandwich or other food from my home fridge, so as I am in China is the company really not allowed to classify my Papa Johns Pizza as a "wholly and exclusively" expense??
Many of the bigger companies I worked for had "guidelines" for staff & directors travelling and gave a subsistence limit or even a hotel laundry limit, but are HMRC rules really that all of these are expenses that comanies must remove from tax calculations even if they pay them to staff/directors??
Yours a bit shocked and having had a few glasses of "free" red wine, so not on expeneses :)
Posting from China, you've got me all jealous now! (I was supposed to go to Chenghai close to Shantou last year but it never happened).
Things are quite different for employee's expenses as opposed to say the director of the company charging expenses.The threads on this site are generally aimed at expenses that directors are trying to get past us (and ultimately HMRC).
Your trip is wholly and exclusively for business purposes so reasonable expenses would of course be allowable. The case in this thread was where someone was attempting to mix business and pleasure at the taxmans expense.
Admittedly the thread did go a little off its original path but the discussions in relation to meals were really based on the plumber who claims for a sandwich rather than someone who is travelling internationally.
For your situation you need to refer to EIM30079 - Dispensations: international aspects: foreign travel and subsistence
The above has links to a whole raft of regulations that basically boil down to the fact that legitimate reasonable business expenses including accomodation and subsistence are allowable where one is travelling on business.
Enjoy the meal and talk later,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
