Got it. Thanks for everyone's help.
Gotta go adjust my accounts now...
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Previously on "Are client contributions towards travel expenses taxable?"
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Originally posted by tractor View PostWe need more input.
Does your company invoice the client for their contribution or is it paid directly to you personally? The answer makes a heap of difference to how it must be treated by you, your company and how the tax office will see it.
Many thanks,
Matt
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Originally posted by TheCyclingProgrammer View PostTrue, I was trying to keep it simple. Generally, I'd imagine most small LtdCos won't have a dispensation and if they do its probably a reporting dispensation rather than for scale rates. But even if you're using HMRC scale rates, you aren't bound by them in what you charge the client so there may still be a difference.
As NLUK mentioned, the dispensations are getting more difficult to obtain now. Glad I got mine when they were rarely queried.
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Don't mention the VAT. I mentioned it once but I think I got away with it.
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Originally posted by TheCyclingProgrammer View PostThis makes no sense.
You're still getting the CT relief on the expenses YourCo reimburses to you.
Yes, this is only cancelling out the CT liability on the extra income from the rebilled expenses but the fact that you've been able to re-bill them means neither you OR YourCo is out of pocket. You are clearly better off from re-billing.
The question is what's the difference between your daily fee, and the money you charge your client to cover expenses? And the answer is: nothing. It makes no difference what you say it's for; it's all part of the sale. So yes contributions towards travel expenses are taxable.
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Originally posted by jamesbrown View PostHowever, the "actual expenses incurred" depends on whether YourCo has a dispensation in place, for which benchmark scale rates may apply.
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Originally posted by jamesbrown View PostVery true insofar as it's important to separate the completely distinct activities of YourCo billing expenses (for which the contract dictates what is acceptable) and you claiming expenses from YourCo (for which there are strict rules to avoid a personal tax liability). However, the "actual expenses incurred" depends on whether YourCo has a dispensation in place, for which benchmark scale rates may apply.
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Originally posted by TheCyclingProgrammer View PostThere is one important thing to note though. OP mentioned his company charging a flat rate for daily expenses. This is fine, but his company can only reimburse him personally for the actual expense incurred or there will be a personal tax liability. So if he charges the client £50 but only spent £30, then his company should only reimburse him £30. This means the £20 excess is essentially profit and will remain liable to CT, obviously.
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Originally posted by northernladuk View PostWould it just be easier to consider this as an uplift in rate and then just claim his own expenses from his company as normal? Would be much easier no?
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Originally posted by Grizzlyjunk View PostFor my current contract, I charge:
- a fee per day.
- a contribution towards travel expenses. This is a fixed amount for each day that I travel to the client's site.
Actual travel expenses (hotel and train tickets) are paid by me.
My question is this: are the contributions towards travel expenses taxable? I have a limited company and I'm wondering whether I pay corporation tax on these contributions.
Matt
As mudskipper says, any rebilled expenses will normally be offset by YourCo reimbursing you for your expenses although what YourCo charges for expenses doesn't necessarily correlate with what it reimburses you. There are rules around what YourCo can reimburse you for without there being personal tax implications but it can bill your client whatever it likes.
Don't forget that your rebilled expenses are also subject to VAT regardless of whether the original expense had VAT on it.
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Would it just be easier to consider this as an uplift in rate and then just claim his own expenses from his company as normal? Would be much easier no?
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Originally posted by VectraMan View PostYes, but, if ClientCo didn't reimburse you for those expenses you'd get tax relief on those expenses. So although you're not paying CT on the reimbursed expenses, you are losing out on the reduction in CT that you would have had if they didn't. So in practical terms, you are paying the CT as your CT is increased.
You're still getting the CT relief on the expenses YourCo reimburses to you.
Yes, this is only cancelling out the CT liability on the extra income from the rebilled expenses but the fact that you've been able to re-bill them means neither you OR YourCo is out of pocket. You are clearly better off from re-billing.
There is one important thing to note though. OP mentioned his company charging a flat rate for daily expenses. This is fine, but his company can only reimburse him personally for the actual expense incurred or there will be a personal tax liability. So if he charges the client £50 but only spent £30, then his company should only reimburse him £30. This means the £20 excess is essentially profit and will remain liable to CT, obviously.
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Originally posted by mudskipper View PostSo if the client reimburses yourCo, and yourCo reimburses you for the same amount (N.B. the amount actually spent!), then the net result is that there's no corp tax to be paid.
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Originally posted by Grizzlyjunk View PostFor my current contract, I charge:
- a fee per day.
- a contribution towards travel expenses. This is a fixed amount for each day that I travel to the client's site.
Actual travel expenses (hotel and train tickets) are paid by me.
My question is this: are the contributions towards travel expenses taxable? I have a limited company and I'm wondering whether I pay corporation tax on these contributions.
Matt
Does your company invoice the client for their contribution or is it paid directly to you personally? The answer makes a heap of difference to how it must be treated by you, your company and how the tax office will see it.
Leave a comment:
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