HMRC - What Do They Know - Visa fee as a tax deductible expense

[rd409]

Answer the following question(s) and you probably will get an answer.

Did you incur the expense only for the business? Are there any additional benefits to you personally?

If yes, then this is not allowed expense, or is a BIK. I would compare this roughly to purchasing a car through company. Not in broad sense, but very similar.

[theroyale]

I put the question to my accountant before renewing my Tier-1 visa. They came back to me stating I CAN claim it as an expense as long as I was within five years of first entry.

Corroborating with what the HMRC said in that Freedom of Information request.

However, if you came to the UK on a tier one visa to look for work and then found this contract the cost would not be allowable and neither would the cost of travel from homeland to the UK under the wholly and exclusively rule.

I renewed my Tier-1 visa WHILE I was working on a specific contract. I would not have been able to continue my contract if I hadn't renewed. And therefore a business expense.

[LisaContractorUmbrella]

I put the question to my accountant before renewing my Tier-1 visa. They came back to me stating I CAN claim it as an expense as long as I was within five years of first entry.

Corroborating with what the HMRC said in that Freedom of Information request.



I renewed my Tier-1 visa WHILE I was working on a specific contract. I would not have been able to continue my contract if I hadn't renewed. And therefore a business expense.

But you also wouldn't have been able to stay in the country - therefore duality of purpose

[pmeswani]

If you show me evidence where HMRC disallows the claim for my exact case (which is quite common - a recent Tier 1 contractor), I won't claim it. We all have our contracts say that if I don't have a visa, I can't fulfill the contract.

If you can show me evidence that a large number of Tier 1 candidates who came into the UK and then applied for a Tier 1 visa and claimed it as an expense from their Ltd Company and then found a contract role, I will back down on my stance.

That would be the HMRC reponse on the link I posted. Looks like they are saying it is ok to do so to me. And it is in response to specifically the Tier 1 / HSMP visa. This link wasn't posted or discussed here already AFAIK. Did you even have a look before responding? The board view has been that 'you would live here anyway'. I would have thought HMRC would respond in the same fashion - but they did not.

The link also says "I would also point out that relief under section 373/374 is subject to a 5 year limit from the date a non-domiciled employee arrives in the UK, so a visa renewal more than 5 years after arrival would not qualify for relief." That works out for my case - not that I see just that as a 'yes, claim it'.

If you believe that the rule applies to you, no matter what we say, you will interpret the statement as being applicable to you. You have to ask yourself, were you offered a contract or a perm role on the grounds you are successful in your Tier 1 application? If not, you don't qualify for it.

The accountants would err on the side of caution. And I wouldn't blame them for it. And I did say the accountant is not really saying it isn't claimable - just the usual if it is wholly and exclusively....thing.

Now, don't be silly please.

If the Accountant is advising you on something, and you have evidence to contradict your accountant, take the evidence to your accountant and fight your case for it. If they accept your argument, and can get it in writing that they endorse your claim, then claim it. If HMRC come knocking on your door, show them the proof. If they say it is not claimable, then either pay up or face the consequences.

BTW, I wasn't being silly in my response. If you don't like what we say, don't ask.

[theroyale]

But you also wouldn't have been able to stay in the country - therefore duality of purpose

Isn't that like saying my workday lunch (which I can claim as a company expense) without which I'd collapse by teatime - has a duality of purpose too?

[rd409]

Isn't that like saying my workday lunch (which I can claim as a company expense) without which I'd collapse by teatime - has a duality of purpose too?

You are not claiming for the workday lunch. It is the incidental expense that you have incurred because you are working away from your normal work place ie. Home. If you are working from home, you would not have bought a lunch from the canteen. You cannot claim cost of pack lunch that you carry to your work place.

Allowable expense for visa is when your client wants you to visit any European country, and you have to apply for visa, because you need it for the contract. Work permits or ICTs are allowable expenses, Tier 1 is not.

[LisaContractorUmbrella]

Isn't that like saying my workday lunch (which I can claim as a company expense) without which I'd collapse by teatime - has a duality of purpose too?

From the horse's mouth:


BIM37660 - Wholly & exclusively: duality of, or non-trade, purpose: non travel topics: subsistence
Cost of food or drink, taken in whole or in part for sustenance, is not allowable
The cost of food or drink consumed for the human requirement of sustenance is not allowable. It does not matter that work occasions a greater appetite or causes greater expense. The expenditure is at best dual purpose. There is no mechanism to allow an apportionment to give a ‘business’ proportion or the ‘extra cost’ imposed by the business. The whole cost is disallowed.

In the case of Caillebotte v Quinn [1975] 50TC222, Quinn was a sub-contract carpenter, working on sites within a 40-mile radius of his home. When working, Quinn could not go home for lunch and bought one at an average cost of 40 pence, compared with an estimated cost of 10 pence for a light lunch at home. Quinn attributed the additional cost to the need to eat a more substantial meal in order to maintain the energy expended in carrying out physical work and to keep warm during the winter. The General Commissioners allowed the additional cost as a deduction from Quinn’s profits under Case I of Schedule D.

Templeman J said that the taxpayer ate to fulfil the human need for sustenance; Quinn ate to live, and not because he was a carpenter. Moreover the attempt to apportion the expenditure pointed out the essential duality of purpose. Templeman J distinguished the cost of food consumed by a carpenter from the cost of food consumed by actors during the course of a performance. There is no deduction where the purpose of consuming food is the human need for sustenance even if that need is increased by the greater exertions required to carry on the trade or profession in question.

Templeman J stresses that the taxpayer’s attempt to apportion the expenditure highlighted its fatal duality.

For those who do not have ready access to tax case volumes, the part of Templeman J’s judgement on which the above guidance is based is set out below, 50TC page 226G to page 227E:

A Schedule D taxpayer, like every other taxpayer, must eat in order to live; he does not eat in order to work. Mr. Medd, for the Crown, submits - and I accept - that in these circumstances no part of the cost of Mr. Quinn's lunch was ‘exclusively ... expended for the purposes of’ his trade as a carpenter. The cost of tea consumed by an actor at the Mad Hatter's Tea Party is different, for in that case the quenching of a thirst is incidental to the playing of the part. The cost of protective clothing worn in the course of carrying on a trade will be deductible, because warmth and decency are incidental to the protection necessary to the carrying on of the trade. There is no such connection between eating and carpentry. The Commissioners appear to have derived some assistance from the fact, which they found, that Mr Quinn's appetite at work exceeded his appetite at home, and from Mr. Quinn's evidence, which they accepted, that he did not regard lunch as a personal habit. In this Court Mr. Nolan, who appeared for Mr. Quinn, disclaimed any such assistance…

… It is not without significance that in the present case the taxpayer does not claim the whole of the cost of his lunch as an allowable expense, but only part of the cost. This attempt to apportion discloses the duality of purpose that is fatal under [what is now ICTA88/S74 (1)(a)]. It is not possible to divide up a meal or the expense of a meal so that the first sandwiches or the first 10p. are attributable to Mr. Quinn and the residue to his business. Nor do I accept the logic of the suggested method of apportionment. No one has a divine right to work and eat at home, or to eat at his place of business, or to measure the cost of his appetite by the cheapest method which would have been available to him if he had chosen to conduct his business in some fashion other than that which he in fact chooses.


HTH

[myco]

You have to ask yourself, were you offered a contract or a perm role on the grounds you are successful in your Tier 1 application? If not, you don't qualify for it.

Quite a standard requirement and first question asked - Do you have a visa? Will you be able to renew it to last through the contract? Got calls from the agency/client when I had a month remaining telling me to make sure visa is renewed on time. And I suppose this applies to every Tier 1 visa contractor.

If they accept your argument, and can get it in writing that they endorse your claim, then claim it. If HMRC come knocking on your door, show them the proof.

Didn't think getting things in writing from accountant was any good as an excuse if HMRC didn't want to accept my business reasons. My accountant does say that that if I can justify to HMRC that it is for business purposes, I can claim it. I don't have to justify it too much to the accontant as far as I know - unless things get outrageous and the accountant prefers to not have you as a client instead. (My accountant is one of the popular resident accontants around here.)

Questions for the accountants - While there must be quite a few clients who want to claim Tier 1 visa costs, are there many who do claim it or are there none at all in your client base? And have any of your clients actually had to pay HMRC tax+fine post an investigation (for the visa fee)?

[LisaContractorUmbrella]

Quite a standard requirement and first question asked - Do you have a visa? Will you be able to renew it to last through the contract? Got calls from the agency/client when I had a month remaining telling me to make sure visa is renewed on time. And I suppose this applies to every Tier 1 visa contractor.


Didn't think getting things in writing from accountant was any good as an excuse if HMRC didn't want to accept my business reasons. My accountant does say that that if I can justify to HMRC that it is for business purposes, I can claim it. I don't have to justify it too much to the accontant as far as I know - unless things get outrageous and the accountant prefers to not have you as a client instead. (My accountant is one of the popular resident accontants around here.)

Questions for the accountants - While there must be quite a few clients who want to claim Tier 1 visa costs, are there many who do claim it or are there none at all in your client base? And have any of your clients actually had to pay HMRC tax+fine post an investigation (for the visa fee)?

Yep we have had loads claim it and the all got caught by HMR&C and had to pay back tax owed and 100% penalties and interest Look I don't wish to be rude but we have all given you our opinion and have all pretty much said the same thing - if you think that you can justify the expense then claim it.

[pmeswani]

Quite a standard requirement and first question asked - Do you have a visa? Will you be able to renew it to last through the contract? Got calls from the agency/client when I had a month remaining telling me to make sure visa is renewed on time. And I suppose this applies to every Tier 1 visa contractor.

So, the client wants you to apply for Tier 1 Visa BEFORE they can consider you for a role? Or are they saying that any offer they make is subject to successful renewal?

No need to answer the question, but you may find the hidden answer in the questions above. If you have been given a conditional offer subject to a renewal, you may, and I emphasise may, qualify to claim the fee. But as already stated by someone else, some contractors had to pay back the tax plus penalties. So you could end up paying more than the cost of the Tier 1 Visa Application. Ask yourself, is it worth the risk? Not for us to answer, but for you to accept.

Didn't think getting things in writing from accountant was any good as an excuse if HMRC didn't want to accept my business reasons. My accountant does say that that if I can justify to HMRC that it is for business purposes, I can claim it. I don't have to justify it too much to the accontant as far as I know - unless things get outrageous and the accountant prefers to not have you as a client instead. (My accountant is one of the popular resident accontants around here.)

Questions for the accountants - While there must be quite a few clients who want to claim Tier 1 visa costs, are there many who do claim it or are there none at all in your client base? And have any of your clients actually had to pay HMRC tax+fine post an investigation (for the visa fee)?

Your Accountant is right that it is up to you to justify it. Judging by previous posts, your Accountant is wise to err on the side of caution. You, and only you, can make the decision. I suspect that you are going to do it anyway, but if it were me, I would err on the side of caution.

If you lack the funds to pay for the Tier 1 Visa, you are entitled to take a Directors Loan from the business (up to £5k without BIK considerations) and pay the money back once you get your contract.

But you have to decide whether it is justified or not. If you do get investigated and face the wrath of HMRC, please do let us know, as it could be a good case study for future questions on this matter.