Limited company and Subsitance

[Lewis]

It really is a difficult and contentious issues (as you can see from the tread!)

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.

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.

OK - extreme example but you get the gist.

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?"

Thanks very much for your reply, much appreciated.

That clarifies things a lot. With regards to the comment that they can then decide to disallow all your other expenses ... is that right? That because they disagree with lunches they can then disallow PL insurance as well? What happens in your experience when HMRC disallow a particular expense. Does it get nasty? I am asking because if this is the case I think it might be best to keep all expenses to the absolute minimum so there is zero ambiguity.

[THEPUMA]

Following Simon's point to its logical conclusion, you would claim for nothing. It would be very difficult to come up with an expense that I couldn't argue wasn't wholly, exclusively and necessarily incurred for the purpose of the trade.

So why not claim subsistence? It is clear from the HMRC manuals and from our experience of dealing with investigations, that in some cases subsistence can be claimed. And there can be no distinction between one temporary workplace and another. So if it is allowed when I go to Wales for a day to visit a client, then it is allowed when you go to your client for 18 months, which is another temporary workplace (assuming it fulfils the other criteria required to be a temporary workplace)

If you decide that morally it is wrong and that you would like to pay more tax, fair enough.

If you are doing it because you think HMRC might challenge it, and it's not worth the aggro given the amounts involved, again fair enough.

I am just trying to make the point that HMRC do not have a stance that they will challenge this and that there is certainly no clear cut legislation, caselaw or guidance that it is not claimable.

So it boils down to your attitude towards this kind of thing. Some clients like to claim everything and some would prefer to be more cautious. I don't mind which decision my clients make, as long as it is an informed one.

[Bluebird]

Following Simon's point to its logical conclusion, you would claim for nothing. It would be very difficult to come up with an expense that I couldn't argue wasn't wholly, exclusively and necessarily incurred for the purpose of the trade.

So why not claim subsistence? It is clear from the HMRC manuals and from our experience of dealing with investigations, that in some cases subsistence can be claimed. And there can be no distinction between one temporary workplace and another. So if it is allowed when I go to Wales for a day to visit a client, then it is allowed when you go to your client for 18 months, which is another temporary workplace (assuming it fulfils the other criteria required to be a temporary workplace)

If you decide that morally it is wrong and that you would like to pay more tax, fair enough.

If you are doing it because you think HMRC might challenge it, and it's not worth the aggro given the amounts involved, again fair enough.

I am just trying to make the point that HMRC do not have a stance that they will challenge this and that there is certainly no clear cut legislation, caselaw or guidance that it is not claimable.

So it boils down to your attitude towards this kind of thing. Some clients like to claim everything and some would prefer to be more cautious. I don't mind which decision my clients make, as long as it is an informed one.

am I right in thinking though that if you do claim it, you need to keep reciepts as an individual regardless of whether there is a dispensation for your company or accountants ?

[THEPUMA]

am I right in thinking though that if you do claim it, you need to keep reciepts as an individual regardless of whether there is a dispensation for your company or accountants ?

Yes

[THEPUMA]

Thanks very much for your reply, much appreciated.

That clarifies things a lot. With regards to the comment that they can then decide to disallow all your other expenses ... is that right? That because they disagree with lunches they can then disallow PL insurance as well? What happens in your experience when HMRC disallow a particular expense. Does it get nasty? I am asking because if this is the case I think it might be best to keep all expenses to the absolute minimum so there is zero ambiguity.

No that's not right at all.

[Lewis]

I guess faced with the risk of a £30k tax bill or paying an extra couple of quid per month the option is obvious.

Afterall we all pay for the IR35 insurnaces, so why take the risk else where ?

I can see ThePumas & ASDs point, but as we all know, HMRCs view of contractors is totally different today than it was 10 years ago - today they see us all as Tax Fiddlers, and to that end may at some point use anything they can to give us slap across the chops.

I for one am using the damage limitation, for the sake of a few quid is it really worth it? And more to the point what sympathy would you get, as Mal pointed out - why should other tax payers [ us included ] subsidise your lunch ?

I agree. I'm more interested in fully understanding how these things work than saving a few quid.

[Lewis]

I don't mind which decision my clients make, as long as it is an informed one.

Absolutely ... I'm glad I've learnt a little more so thanks for all the input.

[THEPUMA]

This issue has now been raised over at Shout99 and the unanimous opinion from 3 experts is that lunchtime subsistence is allowable.

http://www.shout99.com/contractors/s...id=44794&n=430

[simondolan]

This issue has now been raised over at Shout99 and the unanimous opinion from 3 experts is that lunchtime subsistence is allowable.

http://www.shout99.com/contractors/s...id=44794&n=430

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) "

[THEPUMA]

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) "

I can't see how that can be interpreted any way other than that lunchtime subsistance is allowable.

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?