Hi Mark,

I would deem subsistence incurred wholly, necessarily and exclusively for the purpose of trade is acceptable.

For example, the legal requirement to have meal breaks for long distance lorry drivers would be allowable

Also where meals are as part of accomodation either at the hotel or not and this is not a long term arrangement. So one or two nights in a hotel the meal would be deemed acceptable but where a director is staying at a hotel for several weeks or months it would not.

HMRC would argue this point as they have contradictory guidance but I take the guidance in BIM37670 as the definitive guidance on their stance. The key line though in that one is where such subsistence is outside the normal pattern of work. So as I say, a couple of days is ok but a couple of months would not be.

Where subsistence becomes the normal pattern is more difficult to define but using common sense I would say that if one cannot justify such to oneself then they wouldn't be able to argue such with HMRC.... Normal pattern seems right up there with things like the use of the word reasonable! How does one define what is reasonable, or material, or normal? All down to professional judgement and I'm sure that you would agree that when subsistence goes to a week or more from a single hotel it starts to wander into normal pattern of work category (although there will invariably be exceptions to that statement).

My reading is also that subsistence is not allowable where a director is travelling (my reading of Kitty's case) and not actually staying away from home.

kind regards,

Shaun.

-- Edited by Shamus on Thursday 10th of May 2012 05:12:18 PM

Many thanks for the above information, I must have mis-interpreted the information I read on the HMRC's website see extract below:


Business entertainment, business gifts and benefits

"This guide defines business entertainment for VAT purposes and explains how the VAT you pay on business entertainment expenses is treated.

Generally you cannot reclaim VAT on business entertainment expenses. Business entertainment is any form of free or subsidised entertainment or hospitality to non-employees.

You can reclaim VAT on employee expenses and entertainment expenses if those expenses relate to travel and subsistence or where you entertain only employees.
When you entertain both employees and other business contacts together, you can only reclaim VAT on the proportion of your expenses that are not used for business entertainment and are used for business purposes.

You cannot reclaim VAT on business gifts unless the cost of the gift and any others given to the same recipient doesn't exceed £50 in the same year."

~  My Client travels and stays away from home a couple of days at a time to meet his customers (not necessarily every week) and most of the time stays in a B&B, so I understood that as he was away from home and could not provide his own meal by way of cooking, this counts as subsistance. 

I have just read the links you provided, thanks, but I still feel this is ambiguous!! 

-- Edited by Kittycat on Thursday 10th of May 2012 08:43:28 PM

-- Edited by Kittycat on Thursday 10th of May 2012 08:50:42 PM

But just to add that such is not true in all cases Mark,

if the client was an overseas client (which is not detailed in the question) then the VAT would be reclaimable.

Refer to section 2.6 here :

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ShowContent&propertyType=document&id=HMCE_CL_000092


Kitty, would be a good idea for you to read that entire document (it's not a biggy)


from the original question I would be more concerned with the director claiming meals whilst he travels which surely breaches BIM37660 re the fact that we eat to live and the director would only be consuming the same as if they had been at home so why should the taxpayer contribute towards their meal.

See here :

http://www.hmrc.gov.uk/manuals/bimmanual/bim37660.htm

kind regards,

Shaun.

http://www.hmrc.gov.uk/vat/managing/reclaiming/entertainment.htm

Hi Shaun the full link above. Sorry did not intentionally edit anything out.

So in short, if there is ever an investigation, as long as I can show it has not been abused and that I can explain where I got my info from, I can carry on as I was.

My other query subsistance/entertainment questions is : The accountant wants a breakdown for the tax year end of all "travel/subsistance" - fine I can do that, but why does he need this, is deductable from PAYE? I am a humble book-keeper for my Clients accountant, so this is just for my clarification.

Thanks.

The accountant will be looking for a breakdown as some items go on the P11d and others (such as mileage payments) don't.

You may also find that the accountant disallows some of the expenses and routes them of to the DLA.

There is also the matter of breaking down the expenses in the full version of the accounts (#2).

Considering the above it would be interesting to know how the actual breakdown goes through the accounts as I suspect that the client gets "washed" somewhat of anything that's the accountant regards as not completely squeaky clean at the period end.

A proper HMRC investigation would take your client over the coals as to exactly why they needed to visit the client, why they stayed overnight, why they claimed for a meal, etc. I would not say that they had nothing to worry about but at the same time YOU have the defence over your work that you are following published HMRC guidelines.

Make sure that you print the relevent pages (#1) that defend your stance from the Web as HMRC have a tendency to delete the things that you need espechially when they realise that the office junior that they gave the job of writing the website has made a boob that nobody picked up on.

There is to my mind too much of a query with this case (for which I do not have all of the facts) for me to make a definitive call as to which way I would go with this clients expenses. However, you are in a considerably better position to make that call and as such, if you are completely sure about the legitimacy of these trips I am sure that you and your client have nothing to worry about.

Appologies for my somewhat risk averse stance

kind regards,

Shaun.


#1 ensure that you print / save the whole page rather than excerts and ensure that the document cotains a date that it was stored / printed.

#2 Have a read of the last page of last years full accounts and see if the accountant adjusted / eradicated any of the clients expenses figures then.