Allowable Expenses for Ltd Companies

[DDD]

I Have just had a Tax inspection for year ending 2006, one thing i have been pulled on is this.
I use sub contractors to carry out my installation works as well as myself, a lot of our work at this time was around the UK therefore we had to stay away for periods of time.
The contractors where paid on a day rate basis and my Ltd company covered the costs of the Hotels and an evening meal for myself and the contractors working for me. I have been told by the Tax inspector that I should have only of paid for my accomodation and meal (as much as it would cost to eat at home) and that the amounts paid in respect of the contractors accomodation and meals would not be allowed and I will be taxed on these amounts based on the assumption this is not a legitimate expense.
I was told that I should have gotten a fixed cost including all expenses from my contractors as a quotation and paid it as an overall job to them.
I explained that if I ran my company in this manner that it would prove very difficult to get contractors (self employed) to take this works on in the first place and we would not have secured any of the works and therefore not have paid any tax on the profits, this all feel on deaf ears.
Does anyone know where i stand with this? and how i can disagree with there findings?
Thanks Dave

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I explained that if I ran my company in this manner that it would prove very difficult to get contractors (self employed) to take this works on in the first place and we would not have secured any of the works and therefore not have paid any tax on the profits, this all feel on deaf ears.


Unfortunately, the tax inspector is correct from the angle that the contractors being self employed are responsible for paying their own expenses. Had the contractor paid for the accommodation, he would have been able to offset against income as a legitimate business expense. The irony is that if the contractor had billed your company for the accommodation on top of the time billed, you would have been able to claim the full amount against income. In turn the contractor would be required to account for the additional income.

It will be difficult to argue in retrospect, unless there is something in the contract between your company and the contractors agreeing to pay for the accommodation as part of the overall cost. Do you have contracts?

[THEPUMA]

I explained that if I ran my company in this manner that it would prove very difficult to get contractors (self employed) to take this works on in the first place and we would not have secured any of the works and therefore not have paid any tax on the profits, this all feel on deaf ears.


Unfortunately, the tax inspector is correct from the angle that the contractors being self employed are responsible for paying their own expenses. Had the contractor paid for the accommodation, he would have been able to offset against income as a legitimate business expense. The irony is that if the contractor had billed your company for the accommodation on top of the time billed, you would have been able to claim the full amount against income. In turn the contractor would be required to account for the additional income.

It will be difficult to argue in retrospect, unless there is something in the contract between your company and the contractors agreeing to pay for the accommodation as part of the overall cost. Do you have contracts?

What makes you reach this conclusion? I see no reason whatsoever why someone shouldn't pay expenses on behalf of their self-employed workers.

DDD I would ask the Inspector to point you in the direction of any legislation or case law supporting his contention that this is not an allowable expense.