Self Assessment & subsistence Question

[minstrel]

What on earth are you talking about? If it's a company expense then there's no tax to be paid on it, if is a personal expense then it's paid after either corporation or income tax. That's all there is to it. It doesn't matter if your income tax band is 20%, 40% or 1%, it's always better to pay it out of pre-corporation tax company money. How could it possibly be otherwise?

You're missing the point. It's not to do with how much tax you have to pay on it, it's to do with the rate at which you are getting tax relief on it.

There are (limited) situations where putting through the company only gives you relief at 20%, but claiming it through personal tax return could give you relief at 40%.

It's similar the personal vs company pensions contribution debate. If company pension contributions are only offset against CT (20%) but personal contributions are offset against personal tax (22%) you are better off making the contribution personally rather than via the company.

Do the sums and you will see that ASB is correct.

[ASB]

What on earth are you talking about? If it's a company expense then there's no tax to be paid on it, if is a personal expense then it's paid after either corporation or income tax. That's all there is to it. It doesn't matter if your income tax band is 20%, 40% or 1%, it's always better to pay it out of pre-corporation tax company money. How could it possibly be otherwise?

That simplistic view may well be the case in most cases. But it is not absolute. To repeat in a different way:-

Whether a company chooses to pay you expenses is up to it and you. This makes no difference to whether or not you individually can claim income tax relief. If the company does pay (the normal case of course)

- The company gets CT relief
- You get them charged to PAYE
- You get income tax relief on the legitimate ones

[Usually these last two steps simply cancel each other out]

- If the company doesn't pay then you get the relief.

So, if your marginal income tax rate is higher than the company CT rate you get more relief this way. There are a limited number of circumstances where this may be the case.