Reply to: business trip abroad - staying over the weekend makes it cheaper

[northernladuk]

Thanks for all replies - as much as it pains me to admit it you're a helpful lot.

I can help tip the balance if you want..

[arby]

Consider the HMRC claim, and the client invoice separately.

Flight from A to B is £700
Flight from B to C is £300

(Shorter duration A to B flight is £1400).

The client is happy to pay £1000 for the flight.

So bill the client £1000 for the flight.
Only put the A to B leg into your books as a cost, don't put the cost of the B to C leg into YourCo's books - i.e. pay for it personally, or reimburse the company for it. Whatever prevents the B to C leg becoming a BIK.

So YourCo makes a profit of £300 on the cost of the A to B flight (£1000 - £700), which you'll pay Corp Tax on.

Thanks for all replies - as much as it pains me to admit it you're a helpful lot.

The above is what I intend to do. I definitely won't claim the hire car and meals while visiting my friend; that would be taking teh proverbial in more ways than one. Worst case the client only reimburses the £700 but I'd still be happy with that. I'll pay the £300 and any upgrades out of my own pocket so that HMRC has nothing to query.

The trip is quite legit; there will be several of the client's permies traveling with me. They have to fly cattle class so I can't very well insist on the client paying for business class for me. But I can spring for an upgrade out of my company's pocket if I so chose.

[chopper]

Consider the HMRC claim, and the client invoice separately.

Flight from A to B is £700
Flight from B to C is £300

(Shorter duration A to B flight is £1400).

The client is happy to pay £1000 for the flight.

So bill the client £1000 for the flight.
Only put the A to B leg into your books as a cost, don't put the cost of the B to C leg into YourCo's books - i.e. pay for it personally, or reimburse the company for it. Whatever prevents the B to C leg becoming a BIK.

So YourCo makes a profit of £300 on the cost of the A to B flight (£1000 - £700), which you'll pay Corp Tax on.

[Fred Bloggs]

If the choice is bill the client £1400 or bill the client £700 and stump up the £300 personally then I'd head home and not pay anything myself. Why should I be out of pocket trying to save the client money for a trip that they need me to take?

OTOH you may think that visiting a good friend in the USA for the grand sum of GBP 300 is well worth paying and not care a hoot about what the client does or doesn't benefit from.

[WordIsBond]

I need to fly to the US next month to visit a client's site there. An economy class flight costs roughly £1400 flying out on the Sunday and back on the Friday.

I would like to visit a friend which means an additional return flight within the US. Because I would be staying over a Saturday night the total flight cost is actually less, more like £1000.

I think the client would be quite happy for me to bill him £1000 simply because it's less than £1400. But what will HMRC say? Let's say the transatlantic portion is £700 and the US portion is £300 - will HMRC see that £300 as an invalid business expense?

And the airline often offers last minute upgrades to business class if they haven't sold all the seats. I know the client wouldn't pay for the upgrade but I assume I can still claim it as a valid expense as seen by HMRC?

Tell the client what you are doing, and if they are ok with it, have YourCo bill them the £1K. Visit your friend. Report the £300 as a BIK.

[pr1]

I figure that I could argue (!) that there was a legitimate business reason to stay and save money, and failing to do so would be a breach of my fiduciary duties as a director.

fair enough but I wouldn't use that justification in the same breath as ...

I'd also buy the upgrade if it was reasonable and claim that but not invoice the client for it.

!

[TonyF]

The rather obvious solution seems to me to be to claim the GBP 700 and not the GBP 300. Client will be happy because he gets billed for 700 versus 1400 and Hector is happy because you aren't abusing a situation for personal gain. Logical, no?

If the choice is bill the client £1400 or bill the client £700 and stump up the £300 personally then I'd head home and not pay anything myself. Why should I be out of pocket trying to save the client money for a trip that they need me to take?

[TonyF]

IMO document both prices (screenshots etc) to show that staying the extra day was actually cheaper, then claim away

That's what I've done in the past, but only for the flight element. I figure that I could argue (!) that there was a legitimate business reason to stay and save money, and failing to do so would be a breach of my fiduciary duties as a director.

I'd also buy the upgrade if it was reasonable and claim that but not invoice the client for it. Though I'd have pushed the client for a business class flight anyway if it was more than four or five hours.

[pr1]

If you wanted a flight at 7pm after a working day but a flight at 11:55pm was £400 cheaper, no problem - but if the alternative flight was at 00:05 the next day it wouldn't be?

Perhaps it isn't in the "letter of the law" but you could reasonably defend it

[Fred Bloggs]

The rather obvious solution seems to me to be to claim the GBP 700 and not the GBP 300. Client will be happy because he gets billed for 700 versus 1400 and Hector is happy because you aren't abusing a situation for personal gain. Logical, no?

[Maslins]

The question is, was the expenses incurred wholly and exclusively for the purposes of the trade. The minute you start adding in personal trips and costs then it fails this test.

That is one logical conclusion, but I'd suggest provided it's fairly clear that the business reason is genuine and significant, and the holiday element is a trivial bolt on, you should be fine. For clarity I still think any costs directly relating to the holiday part (eg accommodation/subsistence for those days) couldn't be claimed.

Inevitably it can be a bit of a grey area, and some people will push things. Comes down to whether you'd be happy arguing:
- you genuinely went for business reasons, but thought whilst you were there no harm in enjoying the sites in a day off. Vs
- you wanted a holiday to that location, waited until there was some vaguely related conference nearby that you wouldn't otherwise bother attending, but saw it as a way to blag the holiday.

It's not too different to many other things. Buy a laptop cos you need it for work, but occasionally send a personal email = fine. Buy a games machine that you occasionally send a work email from = not fine. Some people may decide they're happy trying to blag the latter, I wouldn't recommend it.

[northernladuk]

Using the same logic I buy a weekly travel card because it's cheaper than 5x daily travel cards, should I be treating it as a BIK because I can get the train on Saturdays?

But that's not the same situation really. There maybe more common sense flexibility around multiple purchases. It can be claimed if the main purpose is for business and not for significant private use. The flight is different.

[pr1]

Price has nothing to do with the letter of the law. Stupid I know but this is HMRC we are talking about.

Using the same logic I buy a weekly travel card because it's cheaper than 5x daily travel cards, should I be treating it as a BIK because I can get the train on Saturdays?

I'd be happy to defend it if I could prove it was cheaper than the alternative

[northernladuk]

IMO document both prices (screenshots etc) to show that staying the extra day was actually cheaper, then claim away

Price has nothing to do with the letter of the law. Stupid I know but this is HMRC we are talking about.

[craigy1874]

It's a nice theory, but isn't relevant for tax law - unless you get a reasonable inspector.

The question is, was the expenses incurred wholly and exclusively for the purposes of the trade. The minute you start adding in personal trips and costs then it fails this test.

A strict inspector will refuse all costs. A reasonable one will say 'well it was cheaper than the other option, less tax relief claimed' and allow it.

Up to you if the take the chance!

Bear in mind if you get the bad inspector, he will also look to either charge the flight on you personally as a BIK or move the cost to your loan account as well as denying the company tax relief.