,I have a client who has been working away quite a lot and so I have received quite a lot of meal receipts for subsistence. Two of the receipts have alchohol listed which I would normally put through as part the cost of the meal, but on at least two of the occasions the cost of the drinks have been as much as the meal and even more (one bottle of Tattinger Brut purchased along with Beer and gin!!!), so I have only put through the meal & one or two of the drinks (and disallowed the VAT on the other drinks). Trouble is, I'm not sure how to record the additional drinks? This is a limited company so should I inform the director that he would be best reimbursing the company for the drinks so that this doesn't become a benefit in kind, or am I worrying too much and should I allow all the drinks????
I will need to speak to the client at some point to ensure that all these meals are in respect of subsistence and not business entertainment, but in the meantime could any one also confirm how to record accommodation and meals purchased on behalf of a subcontractor, as I think that some of these expenses may not have been for the director of this company. My understanding is that a subcontractor is a self-employed person and therefore they should really take care of their own expenses such as accommodation and subsistence and then charge this back to the client if agreed in their contract? but I suspect that maybe this client is paying for it for the subcontractors, so would that be allowable as subsistence & accommodation or should this be added to the cost of the subcontract work and would I be allowed to reclaim the VAT?
I would worry less about the vat man and more about his wife cynic that I am!
I think I would post the additional drinks to his directors loan account unless it is genuine business entertainment (In which case don't claim the vat, and the expense will get disallowed in the tax computation anyway but at least he won't have to put it through his dla).
You have the right thinking behind the second question. The subbie should really pay his own accommodation etc and invoice your client. Often clients do things this way in order to claim the vat back but it isn't allowable in my understanding. I think this needs to be pointed out to the client so he pays the subbies for their expenses rather than the hotels directly.
Sorry, I have another question. I have also been given a Tesco receipt for food, drink and toiletries which I have been told is subsistence. Before I disallow this I wondered what your thoughts were; to explain, this client has taken his caravan on his business trip as it's cheaper that booking into a hotel, which I believe he spoke to his accountant about, but I wouldn't have thought that food bought from the supermarket would be subsistence (certainly not the toiletry items & the booze listed).
Am I right in thinking that you could allow a pre-made sandwich or restaurant meal, as this is more expensive than cooking for yourself at home and therefore the expense has been incurred in the line of your work, and that a normal shopping trip to purchase food whilst on a business trip is normal personal expenditure?
So let me get this right. A client wants HMRC to subsidise jollies for him and his wife (employee... Really?) including good quality bubbly which he also wants VAT free.
Also looking for subsidised essential groceries as god forbid that they should buy toilet paper out of taxed income like non company directors do.
Is it even worth mentioning things duality of purpose...
Sometimes I can really understand why HMRC bend these people over, slap the latex gloves on and go to town on them.
Cynical, moi.... Getting there.
Good luck Elaine!
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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.
Well I've posted the grocery shop and booze against the directors loan account (outside the scope for VAT), as I agree that this shouldn't be treated as a business expenses and I've really appreciated the comments as it's a bit of a worry that you're doing the right thing for the client.
I'm still a little unsure about the situation with the sub-contractors, I've decided not to reclaim the VAT on the accommodation and subsistence paid on behalf of the subcontractors and I've recorded this expenditure separately on the accounts so that the accountant can see that this is not an employee expenditure, hope that's correct?
I have a client who gives me just the credit card part of a receipt on a daily basis for a pub. When I asked about it he said he wanted me to put it through as subsistence and when I explained I couldnt as its round the corner from his house/its a daily basis and I havent actually got the receipt part he answered with (and this is no word of a lie!) 'but its ma tea!' and 'but I work late every night!'
He also put through a hotel bill for a two day course he was on - no problem there of course. On the receipt was breakfast (£3). Then he gave me two separate receipts for what I can only guess is his evening sustenance - booze. No food bill, just the bar bill!!
Ive had two discussions with him about it but it hasnt stopped!
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I think he's probably been listening to Jo Blogs' in the pub telling him that he can put everything through his business, make's it really hard when you tell them that they can't or if we question it.
I have now spoken to my client and he wasn't happy that he couldn't reclaim VAT on Business Entertainment, he also questioned my putting the bar bill through his directors loan account, explaining that he only has a couple of beers and a bottle of wine with his meal; he seemed OK when I explained that we really needed to be careful that we didn't put item's through as subsistence when they clearly are not (i.e. an expensive bottle of wine) as this could result in HMRC delving deeper into his accounts under inspection and a possibility of genuine business expenditure being disallowed and, at the end of the day, if I've picked it up then you can bet your bottom dollar HMRC will/
I also found an article on what counts as subsistence which explained that subsistence is really only on meals (whilst working away from home) as the cost of purchasing a meal is considered to be, in general, more expensive than having a home cooked meal and therefore the difference between the cost of the home cooked meal and the meal at a café or restaurant is really the business element of the expenditure but HMRC allow the whole cost because it would be impossible to make such a calculation. This helped me explain to the client that I couldn't allow the shopping bought whilst on their business trip as it didn't really incur any additional expenditure than it would have done if he had been at home and would therefore be considered as eating to live.
Again he seemed to understand my explanation, however he did ask me if I had any good news!!!!
Hi Elaine Loving the explanations - might have to try that with my beer swilling, I mean beer eating customer - if only I could pin him down (not literally, ewwww) long enough to have a chat about such things. Your last line made me laugh - good news is you will save him a big HMRC fine!!!!
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
