Claiming expenses incurred abroad finding client

[mudskipper]

Nevermind, I do not believe I am inside IR35 having researched the subject and re-read my contract.

Best to get it professionally reviewed.

[WordIsBond]

If you are inside IR35, it is a savings of 40% income tax plus 13.8% employer NI plus 2% personal NI, I believe. So this is real money we are talking here.

It is going to be hard for HMRC to prove you are inside IR35 if you have a good contract and are doing all your work in the UK for a US client with no presence here. HMRC can't sit down with them and trap them into saying the wrong thing with a lot of leading questions, and it will be very hard to prove "direction and control" (or "part and parcel") if you aren't even on site. But if you want to become a permie and probably will in a year's time, that won't be in your favour, because you'll be doing stuff to become part and parcel of the organisation in working towards your ultimate goal.

As to whether the expenses are deductible, this is not so clear cut as some people think.

Lord Brightman, in Mallalieu v Drummond:

The object of the taxpayer in making the expenditure must be distinguished from the effect of the expenditure. An expenditure may be made exclusively to serve the purposes of the business, but it may have a private advantage. The existence of that private advantage does not necessarily preclude the exclusivity of the business purposes.

This has been cited in multiple cases. Mallalieu lost her case because her expenditures were not exclusively for business purpose, but the principle above has been applied to many expenditures -- an effect of private advantage does not preclude the exclusivity of business purpose.

If you can prove that the object of the expenditure was solely for business, and treat the holiday at the end of the trip as an effect of the expenditure, you might have a reasonable case.

For instance, you said that your flight was booked immediately after the first interview was arranged. That's a pretty strong point in your favour. The fact that the return was six weeks after may not be particularly relevant -- presumably you had to come back some time, you would argue you set an ending time based on your expectation of the interview process. You arranged other interviews with other potential clients. That's also helpful. Do your credit cards show you spending money on tourist stuff during those four weeks? That would damage your case. The fact that you've been there before and so weren't just having a holiday to a new place also helps -- do you have evidence of that?

It may hinge on this. When did your partner book HIS flight and arrange for time off at work? And can you prove the date you got the offer? If your partner booked a flight before you got the offer, then HMRC will (rightly, in my view) argue that the plan was for this to be a holiday as well as business, so not solely for business.

If his time off work was arranged and his flight booked AFTER you got your offer, then you have a strong case that the holiday part of the trip was a later decision and had no bearing on the decision to buy your plane ticket. You bought the ticket, and paid for the hotel rooms, up until the time you had your offer (or contract), solely for business. What ensued after you got the contract was a decision to mix business with pleasure, and any expenses after that decision probably can't be claimed. The opportunity to make that decision, and mix business with pleasure, was, quoting Brightman, "an effect of the expenditure," rather than a purpose of it.

The cutoff point would not be when your partner arrived, but when he began to make arrangements to come (booked his ticket). From that point on, the "exclusively for business" test is in trouble. And if he did it before you had a contract, HMRC will argue that was the plan all along. If you can prove he did it after you got the contract, your case is pretty good. The stronger the evidence, the better. The date he booked his ticket is probably the key point, but if he also arranged time off work after you got the contract, that would strengthen your case even more.

[PerfectStorm]

I sometimes wonder if people on this forum like dreaming up imaginary scenarios where the full letter of the law is applied, as opposed to the more common sense approach taken in the real world.

Most real company directors I know have been claiming far worse for decades.

[northernladuk]

Thanks Coconut. I'll check with accountant anyway, see what he says.

Out of interest, assuming I am under IR35, which I almost certainly am, and will be subject to the higher 40% tax bracket on my income, then I would effectively be saving 40% on this amount if it was allowed, is that correct? I apologise for being very naive about all this..

Also again out of interest, my company was formed this April, which means I would not need to put these expenses through until next year? If I am permanently living in the US at that stage, as I hope to be, and the company is wrapped up, would that have any effect on how aggressively HMRC challenges my expenses, especially if smallish amounts. I am assuming it makes not the slightest difference....but just wondering.

Why are you still here? Your selectively picking advice about a complex situation regarding expenses and now have thrown IR35 I and are still asking a load of people who have been giving you inconclusive answers for advice. Why are you not speaking to an accountant??

Maybe you're just another trolling idiot that knows the answer but wants someone to give you the answer you want to hear. Funny thing is it won't matter. It will be down to your account. Best to save yourself... And us a load of grief and go speak to one now...please.

[TheFaQQer]

I went to the US from the UK for a month earlier this year to interview with companies and was offered a job, where I would work as a contractor from the UK(after a year or so I am hoping to be taken on as a full time employee and move to the US). I returned to the UK, set up an Ltd. and now work for my US client from here.

Out of interest, assuming I am under IR35, which I almost certainly am

Nevermind, I do not believe I am inside IR35 having researched the subject and re-read my contract.

What changed in the 5 1/2 hours overnight?

You admit you were offered a job. You admit that you are going to work as a contractor with the aim of a move to the US.

So what now makes you confident that you are outside IR35 now, particularly considering how many American companies view contractors?

[northernladuk]

What changed in the 5 1/2 hours overnight?

You admit you were offered a job. You admit that you are going to work as a contractor with the aim of a move to the US.

So what now makes you confident that you are outside IR35 now, particularly considering how many American companies view contractors?

Because he's a troll and he's just trying to find new ways to keep us occupied.

[Contreras]

I'd say that practically speaking IR35 is a non-issue in this case, but yes get the contract reviewed.

I'd be more concerned about legal jurisdiction of the contract, potential liabilities, and appropriate insurance.

Then I'd be taking advice re. VAT, PAYE, dividends and ER in the context of this contract and any plans to leave the UK.

Re. pre-incorporation costs, meticulous records just in case is all I would bother with for now. The savings to be had are insignificant compared to getting the above done right.

[northernladuk]

What's the betting how to get paid and currency will be next....

[jamesbrown]

I'd say that practically speaking IR35 is a non-issue in this case, but yes get the contract reviewed.

I'd be more concerned about legal jurisdiction of the contract, potential liabilities, and appropriate insurance.

Then I'd be taking advice re. VAT, PAYE, dividends and ER in the context of this contract and any plans to leave the UK.

Re. pre-incorporation costs, meticulous records just in case is all I would bother with for now. The savings to be had are insignificant compared to getting the above done right.

Yes, this is absolutely right. Clearly, the OP read a little about IR35 overnight and decided they didn't want to be inside . However, on the basis of D&C alone, the working practices are probably not inside. They should get the contract and working practices reviewed in order to make an informed decision. In terms of insurance, I'd be very surprised if the jurisdiction and governing law is outside a US state, so they will, indeed, need to consider insurance carefully.

[Pondlife]

What's the betting how to get paid and currency will be next....

^ this