but if you have gone to a business meeting then gone shopping for a few hours it may not be. It will depend the reason for the ticket. I believe penalties are a different story.
but if you have gone to a business meeting then gone shopping for a few hours it may not be. It will depend the reason for the ticket. I believe penalties are a different story.
Kris
What sort of a person would you be if you went to a meeting, parked up, had the meeting then did a tad of shopping, and didn't put the ticket through as a business expense in its entirety.
but if you have gone to a business meeting then gone shopping for a few hours it may not be. It will depend the reason for the ticket. I believe penalties are a different story.
Kris
You mentioned penalties - I'm thinking that this isn't going to be an allowable expense - is that the case? (even if you did get the penalty whilst on business). Thanks in advance for any clarification.....
I believe fines & penalties are not allowable expenses at all. A fine is a punishment for something that you should or should not have done. If you were allowed to write part of it off your taxes it would defy the whole purpose of a fine.
Fabs
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You are right. Fines and penalties incurred for breaching the law are not allowable expenses according to HMRC website.
I have a client who is a director of a limited company and has a couple of vans on the road, one of which is driven by employees. Just recently one of the employees has incurred a couple of fines which my client has paid from the business bank account. In this case then, would the fines be posted to his DLA? And if so, do you think he should be claiming the fines back from the employee? He has said that he would let these two go, but any more and he would have to ask it to be paid back.
Here comes my big spanner in the works. What if you are parked in a private car park and get a civil penalty notice. Is that an allowable expense? After all it's not a fine due to breaking the law, but more a penalty for breach of contract.
just because an expense is not allowable it does not mean that it has to be excluded from the books. There are expenses that are included in the P/L even if they are not tax deductible (e.g. depreciation). What I normally do is to create an additional sub-section in the chart of accounts under the 'overheads' section an call it "disallowed expenses". Under this section I would list all those expenses that were incurred as part of running the business (e.g. paid from the business bank account) but not allowable for tax purposes (e.g. food & drinks, client entertainment, some training expenses, fines & penalties, etc.). At the end of the year these expenses will be added back to the net profit to do tax calculations (just like we normally do for depreciation). My P/L also shows two Net Profits: one is calculated considering all expenses and one calculated including only allowed expenses. I find that this gives the client perspective; they normally ask what that is and it gives me the chance to explain to them the difference between allowed and not allowed and how to keep an eye on these things.
I produce monthly management accounts for my clients and it is my experience that clients find this extra section beneficial as it allows them to highlight how much money is spent on these non-allowable elements so that they can put an end to it if people (employees) get carried away.
Hope this helps.
Fabs
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Here comes my big spanner in the works. What if you are parked in a private car park and get a civil penalty notice. Is that an allowable expense? After all it's not a fine due to breaking the law, but more a penalty for breach of contract.
discuss...
Kris
Hi Kris
This the relevant extract from HMRC website
"Civil proceedings
A revenue payment, in settlement of a civil action arising out of a trade, may be allowed as a trading deduction where the allegations were neither admitted nor proved (see Golder v Great Boulder Proprietary Goldmines Ltd [1952] 33TC75). Where liability was admitted or proved, a deduction may be allowed where the payment was restitutionary, but not if it was punitive."
When I first started bookkeeping, I couldn't get my head round the two different calculations. Particularly in something like a partnership, where the shares taht each had didn't reconcile, with the taxable share. Couldn't see what happened to the difference?
Then finally the penny dropped, that the main calculation was the financial calculation, and from that a seperate caculation is made to work out the tax owed. The tax calculation had nothing to do with the funds available on the financial statements but was just a means of calculating the tax.
That's a really good idea.....many thanks for sharing that. The fines have been paid from the business bank account so I have to show them somewhere, so that helps a lot.
What about the scenario where the employee pays the fine and then the employer reimburses him? Is this allowable, or would the same restrictions apply?
What exactly does it mean when it says "If the employee voluntarily pays a fine in these circumstances, and the employer reimburses it, the employee will be chargeable on the emolument arising "
It sounds like the reimbursement of the fine to the employee (in some circumstances only) is considered an addition to the employee's wage so the employee will have to pay tax on it and the business will be allowed to deduct the payment for tax purposes (just like it does with wages).
I hope my interpretation of that is correct, but I do believe that, as usual, HMRC is making everything more complicated than it should be.
Fabs
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