Reply to: Used personal airmiles for business travel

[ContrataxLtd]

Let's extend the analogy. As well as buying £10 of paper for the business, I buy some personal items as well, taking the bill to £20. I pay £15 in cash from my personal account, and £5 voucher from my personal account. How much should I put down as the cost of the paper when I put it down as an expense?

Hi TF

Just throwing in my 2p....

From your analogy above I'd be claiming £10 back from the company for the cost of the business expenses.

If you take you example of just the £10 business expense then depending on how this was paid determines how I'd treat it:

1. Bought the paper personally (voucher/cash etc.) and reclaiming as an out of pocket expense - Claim back £10 and this is the cost to the company.
2. Used a personal voucher for £5 and the balance on company debit/credit card - Reclaim £5 as out of pocket expenses and the balance as a business expense so total of £10 expense to company.
3. Use a voucher the business has and pay balance on company card - Just the balance as an expense as the amount covered by the voucher doesn't have a 'cost' to the business.

Obviously it's much easier to not use personal vouchers, air miles etc. for business use as it is sometimes quite hard to establish the actual cost to the company.

Hope this helps.

Martin
Contratax Ltd

[TheFaQQer]

But you didn't pay £10 for the paper, you paid £5. That's like saying that you bought a new desk which was £200 rather than £400, as there was 50% off in the sale, but you were going to put £400 through the business because that was what it had been worth

I paid £5 in cash and £5 in vouchers, so a total of £10. The receipt shows £10 for paper. You seem to think that because the payment mechanism isn't cash, that somehow reduces the value of the item, whereas I don't.

In your example, the receipt shows £200 for the desk which is what was paid. I would therefore claim £200 because that's the cost of the item.

Let's extend the analogy. As well as buying £10 of paper for the business, I buy some personal items as well, taking the bill to £20. I pay £15 in cash from my personal account, and £5 voucher from my personal account. How much should I put down as the cost of the paper when I put it down as an expense?

What's the answer to that one?

[LisaContractorUmbrella]

Why is the value £5 when the cost is £10?

The payment of £5 comes from my personal account. I have a receipt showing I paid for £10 worth of paper. Why does the payment mechanism make any difference?

Let's extend the analogy. As well as buying £10 of paper for the business, I buy some personal items as well, taking the bill to £20. I pay £15 in cash from my personal account, and £5 voucher from my personal account. How much should I put down as the cost of the paper when I put it down as an expense?

But you didn't pay £10 for the paper, you paid £5. That's like saying that you bought a new desk which was £200 rather than £400, as there was 50% off in the sale, but you were going to put £400 through the business because that was what it had been worth

[TheFaQQer]

If you purchased paper for £10 and had a £5 voucher then the cost to your business i.e. what leaves your business bank account, is £5.00. You would have obtained the voucher as a result of personal expenditure and you would have purchased whatever it was you bought regardless of whether or not you would get a voucher so I can't see how you could possibly justify it as a business expense

Why is the value £5 when the cost is £10?

The payment of £5 comes from my personal account. I have a receipt showing I paid for £10 worth of paper. Why does the payment mechanism make any difference?

Let's extend the analogy. As well as buying £10 of paper for the business, I buy some personal items as well, taking the bill to £20. I pay £15 in cash from my personal account, and £5 voucher from my personal account. How much should I put down as the cost of the paper when I put it down as an expense?

[LisaContractorUmbrella]

So £10 then.

Explain how that is different from selling something which has value to the company so that the company can use that in the course of their business.

If you purchased paper for £10 and had a £5 voucher then the cost to your business i.e. what leaves your business bank account, is £5.00. You would have obtained the voucher as a result of personal expenditure and you would have purchased whatever it was you bought regardless of whether or not you would get a voucher so I can't see how you could possibly justify it as a business expense

[TheFaQQer]

The actual cost to your business. Thought this was an interesting one so I ran it past our compliance manager here who's an ex HMRC inspector and he thought the same - you can only put through costs to the business that you have actually incurred

So £10 then.

Explain how that is different from selling something which has value to the company so that the company can use that in the course of their business.

[LisaContractorUmbrella]

I have a £5 voucher from Tesco because of my personal shopping. I go to Tesco and buy £10 worth of printer paper for my business. I pay for the paper using £5 cash and £5 voucher. What should I charge my company - the £5 in real money that it cost me, or the £10 that the item actually cost?

The actual cost to your business. Thought this was an interesting one so I ran it past our compliance manager here who's an ex HMRC inspector and he thought the same - you can only put through costs to the business that you have actually incurred

[northernladuk]

If he gets miles on the flight he is taking which is a business one then the whole argument about the miles being personal get's very grey. Just saying like.

[malvolio]

I have a £5 voucher from Tesco because of my personal shopping. I go to Tesco and buy £10 worth of printer paper for my business. I pay for the paper using £5 cash and £5 voucher. What should I charge my company - the £5 in real money that it cost me, or the £10 that the item actually cost?

Trick question. Nobody sensible buys company stuff personally...

But if you do, it's £10 if you only use the paper for company business*. Otherwise, whatever you want as an expense claim up to the market value of the goods but it's a BIK.



* I don't. I buy paper for my own use and don't care in MyCo uses some of it.

[TheFaQQer]

You could be right but I can't see HMRC wearing it. You travel for personal reasons, not business - in return you get some points which then entitle you to an element of 'free' travel - you then pass this advantage to your LTDCo but for a price. I really can't see how you'd justify it in such a way that HMRC would say okey dokey.

I have a £5 voucher from Tesco because of my personal shopping. I go to Tesco and buy £10 worth of printer paper for my business. I pay for the paper using £5 cash and £5 voucher. What should I charge my company - the £5 in real money that it cost me, or the £10 that the item actually cost?

[LisaContractorUmbrella]

The company would pay for it, though.

The employee sells a discounted ticket to the company which allows for first class travel. The company could have paid the full fare, but instead chose to pay a lower amount than the full fare. How the employee obtained the discount is neither here nor there, IMHO.

You could be right but I can't see HMRC wearing it. You travel for personal reasons, not business - in return you get some points which then entitle you to an element of 'free' travel - you then pass this advantage to your LTDCo but for a price. I really can't see how you'd justify it in such a way that HMRC would say okey dokey.

[TheFaQQer]

sorry rephrase - you'd be hard pushed to expense something through the company that the company hasn't paid for and as the initial travel was personal IMHO you'd have no chance

The company would pay for it, though.

The employee sells a discounted ticket to the company which allows for first class travel. The company could have paid the full fare, but instead chose to pay a lower amount than the full fare. How the employee obtained the discount is neither here nor there, IMHO.

[LisaContractorUmbrella]

You would have paid for it - the company pays the employee for the points. The points have a value, though, so can be sold to the company.

The employee then has to pay tax on it as income, so I can't see any benefit in doing it.

sorry rephrase - you'd be hard pushed to expense something through the company that the company hasn't paid for and as the initial travel was personal IMHO you'd have no chance

[TheCyclingProgrammer]

I don't see any reason to make this complicated.

Travel is incurred personally whether the company pays for it or you do and are reimbursed. It's treated the same either way.

If OP bought their ticket at a discount due to having airmiles then I would say that the simplest thing is to reclaim the net cost as an expense.

An alternative way of thinking about it is that the employees out of pocket expense was the cost of the flight plus the monetary value of the airmiles. I wouldn't value the airmiles used as any more than the amount of discount OP got. Therefore the total cost to the employee is the pre discount cost if the flights so OP should recover the gross cost from their Co.

Separate to this is whether the expense is tax deductible and this of course depends on the usual rules around business travel.

There's nothing in the travel rules that state you can't travel first class, as long as the journey is wholly, exclusively and neccesarily for business purposes.

[TheFaQQer]

I think you'd be hard pushed to justify expensing something that you haven't actually paid for

You would have paid for it - the company pays the employee for the points. The points have a value, though, so can be sold to the company.

The employee then has to pay tax on it as income, so I can't see any benefit in doing it.