Following on from the excellent discussion which recently concluded on allowable expenses, eating and subsistence (or, in one case subsidence - sorry; not poking fun, it just made me smile on a hard day). My query is really to do with applying HMRC's rules in my bookkeeping. Here goes:
1. HMRC acknowledge that, whatever you decide to spend wholly in pursuit of your business, you have the right (thank you HMRC) to consider as a business expense. So far so good.
2. They don't agree that it's all tax-deductible, though. Fair enough; it's for them to make their rules.
3. HMRC allow "modest" overnight subsistence expenses to be tax deductible (believed to be £5/£10 UK/abroad average per night) but also say, apparently, if you enter an expense in your business records which exceeds that "modest amount", then none of what you've recorded is allowable for tax.
That appears to mean that, say, for a £20 meal, I should account for my self-employed client's expense as £5 business expense and £15 private expenses, paid for by the business. Or would it be better to account for the £15 in a separate "disallowable" NC and note it as being disallowable when he comes to fill out his SA100?
(I also think it's a parsimonious rule, but that's only a personal opinion which doesn't count for diddly).
The amount of £5.00 (UK) and £10 (Overseas) is for PIE (Private incidental expenses). This is to cover private expenses, like a telephone call home, having your clothes cleaned etc.... It is to cover the expenses which would not normally be allowable, but because of the incovenience of being away from home the HMRC are happy to allow these fixed amounts.
Overnight subsistence expenses have always been 100% allowable provided it is accompanied by a hotel bill, and it is a legitimate business trip. So if you want to spend £75 on a meal including wine, and its part of a hotel bill, they will not question it as long as it is a legitimate business trip. Don't have anything from the mini-bar though - thats part of the PIE.
Its the subsistence expenses without an overnight stay the HMRC will question.
-- Edited by YLB-HO on Monday 15th of August 2011 04:08:23 PM
Thank you Frauke - a very helpful reply (as always). Would I be right in thinking that having a coffee, say, on a long business journey, would be regarded as a PIE?
As an aside, it seems all wrong that one spends hours nibbling away at HMRC rules to allow claims worth pennies (like en route snacks) while large expenditures - office equipment etc - which often have a private use can sail through validation without a comment.
PIE has always been linked to an overnight stay. Which may explain why HMRC now call it Incidental Overnight Expenses - so I suppose the PIEs are gone! Strictly speaking its for employees, rather than the self-employed, but found the HMRC are quite happy to allow it as long as the amounts involved are not substancial.
The HMRC have a thing about alcohol (may have something to do with thinking thats its linked to "entertaining"!), but coffee & soft drinks on some occassions would be allowable. I recently read of a case where the HMRC disallowed the "subsistence" costs for a networking meeting, but allowed it in the end when it was explained that the costs were conditionally and instead of "room hire" which was free! So what this means is the "susbsitence cost" for a networking (or business trip) should not be recorded in the accounts specifically as subsistence on their own (when they would be disallowed) but recorded as hotel/room hire costs, or as general "Travel & Subsistence" and then they are allowable!
I used to process the expense claims of service engineers who would have minibar charges on their bills. They were allowable because:
1: It was a minibar bill in a country were alcohol was banned - so did not include alcohol 2: They often worked 18hr days in factories, with no breaks or access to more than very basic facilities and therefore were unable to follow normal rules due to work practices.
One client I have, gives me all her Travel & Subsistence receipts, but unfortunetly on the same bank statement I can see that they are sometimes for her to go shopping in Oxford Street! So I disallow them. However any claim which does not include lots of personal shopping I automatically allow. A long time ago, a Tax Inspector told me that as he saw I did disallow some expenditure, he trusted my judgement and would not check all the transactions!
Like many things, you need to look at the whole picture and context to decide if it is allowable or not.
-- Edited by YLB-HO on Wednesday 17th of August 2011 10:01:16 AM
- sorry; not poking fun, it just made me smile on a hard day). My query is really to do with applying HMRC's rules in my bookkeeping. Here goes:
