Client who runs sports coaching holidays abroad and as part of the holiday pays for meals out and drinks for customers. Would you class this as an expense or as a cost of the price of offering the holiday? If it is an expense, how much of this is an allowable expense, does it differ whether abroad or in this country and should the cost of his meals be separated out of the total amount and included within payroll as an expense and included on a P11D? It is a limited company, not registered for VAT, there is one director, he doesn't run a payroll as he doesn't pay himself a salary but does expect to be reimbursed out of pocket expenses such as the flight costs, accommodation and meals/drinks.
I feel that all these items of expenditure are part of the cost of running the holiday as the the main part of the holiday is that he is there to coach and the customers going on the holiday pay a fixed price that includes the cost of accommodation. I'm mainly concerned about accounting for the meals & drinks and the cost of his flights?
Can anyone point me in the right direction please?
I've done a cross check with several countries that I've worked in and the rates allowable seem very generous.
For entertaining clients the company could pick up the bill but entertaining is not allowable for tax purposes so reverse out in the computation of tax.
HMRC can look at that two ways, either that the business is paying for the entertaining so the business pays the tax or that the entertaining is within the control of the director and entertaining is part of their role in which case the entertainment could be deemed an extension of salary and hence liable for NI as well as tax.
The latter option is seldom enforced but its something to be aware of in the HMRC arsenal that they could use if they thought that expenses were being abused.
If your client keeps all receipts and keeps things reasonable (avoid requests to put through the Crystal champaign parties at pole dancing clubs, lol) then HMRC should accept it as taxed through the company rather than personally.
Just remember that the directors own expenses go through their subsistence but the client entertaining is a taxable expense.
Good question that I am sure will spark some alternate views,
kind regards,
Shaun.
p.s. sorry, forgot to come back to the original cost of sales part of the question. I see non of it as a direct cost of sales. The arrangement is more in line with the expenses born by an IT contractor whilst on a short term overseas contract.
-- Edited by Shamus on Monday 30th of September 2013 10:35:27 AM
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Shaun
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