Limited company and Subsitance

[ittony]

What does this mean? Well, the Revenue can deny these claims whenever they choose, and they can go back if they wish for 6 years. Usually they will treat the disallowed expense as being monies received net of PAYE, so they will gross up the amount to add on employers NI, employees NI and the tax - your £10 a day for lunch then for PAYE purposes might add up to £18 a day.

So, say 200 days £18 a day over 6 years is £21600. Add on interest and penalties and you've got a bill for over £30k.

How on earth can receiving £10 before tax which subsequently turns out should have been subject to tax possibly result in a tax bill of £18?

[simondolan]

On a complete aside, I seem to recall you saying that you had a letter from HMRC stating that you were not an MSC provider. Is my recollection correct?

An email stating we were not considered to be caught by the new regulations, yes. Why?

Incidentally, why don't you just email me if you are interested in what we are up to?

[THEPUMA]

An email stating we were not considered to be caught by the new regulations, yes. Why?

Incidentally, why don't you just email me if you are interested in what we are up to?

I am naturally interested in obtaining such an email in respect of our services. If you are happy to communicate privately on this matter, I'd be delighted to.

[simondolan]

How on earth can receiving £10 before tax which subsequently turns out should have been subject to tax possibly result in a tax bill of £18?

Compounded interest and penalties.

[Jog On]

In my view the question of whether one should or shouldn’t claim lunch and other expenses is tied to the ‘in business on your own account’. I claim rent/broadband and some electric because I use my home office to generate revenue for my company. Contracting is just a part of what my company does and I am aiming soon to work from home full time on internet marketing which I spend a lot of time on – in my home office.

For that reason I consider the portion of rent/broadband/electricity as being equally tax deductible as things like domain names, web hosting, Google adwords clicks, outsourcing research to virtual assistants and paying someone on elance or rentacoder to develop software products. Not to mention training materials, software, hardware, office furniture and stationary.

So – when I’m on site contracting and not at home building up the web business I claim all travel and £5 a day lunch/coffee etc – all receipts kept of course. The whole concept of ‘flying below the radar’ by not ‘taking the pi$$’ is moot for me because I am genuinely building up a growing business by reinvesting my profits to increase revenue. Does claiming as much as I can as legitimate business expenses make me an entrepreneur or a tax avoider? I’ll write up a business plan if necessary – maybe that’s not a bad idea anyway..

Here’s a question – say you meet up with an old friend specifically to talk about a potential gig. You meet over a meal and a few drinks which you pay for. Do you claim it as ‘entertainment’ for a potential client? I did this recently, met with a mate I haven’t seen for years, we met mainly to talk about me doing some SEO/web marketing and Google adwords campaign management for one of his clients with a view to doing a lot more work with more of his clients if this one worked out (he’s a designer I’m an SEO/marketer). I paid for the food and drinks and put it through my company without a second thought. Is that dodgy? Because it was 100% genuine client entertainment even if it was an old friend.

[THEPUMA]

Compounded interest and penalties.

Nice try but you added interest and penalties on top of that figure!

[ittony]

txtony

Compounded interest and penalties.

Ha! Nice try indeed.

Try again?

[ASB]

I wouldn't exactly say that - this from the ex Revenue chap:

"We eat in order to live not in order to work BUT if the employment dictates that you spend more than would otherwise have been the case then the extra amount spent is allowable. In real life this is impossible to administer so HMRC will grant the whole of the expense where you can demonstrate that more than normal was spent. You need to keep the documentary evidence - the journey has to qualify for tax relief (eg if you fall foul of the 24 month rule you cannot claim) "

Don't want to be picky - because you are all far more qualified than I am but this seems to be in direct contradiction to Caillebotte v Quinn

http://www.hmrc.gov.uk/manuals/bimmanual/BIM37920.htm

I accept this is a schedule D case and might not be relevant.

[THEPUMA]

Incidentally, following Bob Jones' post on this forum recently I spoke to him regarding the issue of whether or not subsistence was reclaimable by contractors working at a temporary workplace without incurring a benefit-in-kind and his answer was that it unequivocally was.

Yet another example of why paying a cheaper accountant can be a false economy. Both SJD and Nixon Williams have categorically stated on this thread that subsistence cannot be claimed whereas it clearly can.

[simondolan]

Odd that you resurrect a thread over a year since someone last posted on it, specifically to try to knock your competition......


Anyway what I actually said was:

"OK, legally speaking you have no right to claim for subsistence. In order for an expense to be allowable it must be wholly, exclusively and necessarily incurred in the course of employment (you are employed by your own Ltd Company). Case law is notoriously strict on this subject. A female barrister claimed once for the purchase of black clothes she wore in court. Fair enough you might think, but the claim was thrown out (at the House of Lords eventually I believe) on the basis that the clothes served a dual purpose - ie they were for business use, but also served to keep her decent (no sniggering please). Now, a barrister is self employed and so the basis of claim is actually less strict than that of an employee.

So, if the Revenue deny your claim for subsistence you have no basis in law to appeal.

However, it is self evident that most Revenue districts will allow claims to a varying extent, but it is important to realise that they do this out of policy and not statute. The question then to ask yourself maybe is "Do I think the Revenue are capable of changing their minds and starting to disallow these claims?"

Incidentally, following Bob Jones' post on this forum recently I spoke to him regarding the issue of whether or not subsistence was reclaimable by contractors working at a temporary workplace without incurring a benefit-in-kind and his answer was that it unequivocally was.

Yet another example of why paying a cheaper accountant can be a false economy. Both SJD and Nixon Williams have categorically stated on this thread that subsistence cannot be claimed whereas it clearly can.