Reply to: Subsistence - Exactly what can be claimed?

[TheCyclingProgrammer]

Yes I will be a limited company on a flat rate scheme, if I claim for train fares is this fully reclaimable or is it just tax relief?

Are any expenses fully reclaimable working thru a limited company?

Newbie needs to get an accountant.

Your company can reimburse you for any expenses it likes and in most cases (but not all) those expense payments will reduce its corporation tax bill, just like your salary does.

But any expense payments you receive may incur income tax and/or NIC if they aren't wholly, exclusively and necessarily for business purposes. Further, certain expenses have very specific rules, like travel for example.

Your expenses are reported on your P11d, unless they are exempt (like mileage payments at prescribed rates) or you have a dispensation.

You enter these expense payments on your tax return and make a claim for relief on your business costs. This normally results in no extra tax to pay as long as you've only been reimbursed for genuine business expenses.

You get personal tax relief on qualifying expenses but it should be obvious that any expense payments reduce YourCo's gross profit.

[Newbie Simon]

Yes I will be a limited company on a flat rate scheme, if I claim for train fares is this fully reclaimable or is it just tax relief?

Are any expenses fully reclaimable working thru a limited company?

[Martin at NixonWilliams]

Thanks for your replies.

Say I earn 50k a year and spend say £30 on lunch per week (say 46 weeks) so that's £1380 my take home pay would be 50000-1380=48620-20% tax=£38896 assuming I have no other expenses is this correct?

Assuming you are working through a limited company, you would deduct any further expenses from the figure you have calculated such as accountancy fees, salary paid etc.

This is the amount that would be subject to corporation tax at 20%. The figure you are then left with is your profit after tax. The profit after tax is the amount that can be declared as dividends.

Your overall take home pay will be the amount received after any taxes and NI due on your salary and dividends.

I hope this helps.

Martin

[TheCyclingProgrammer]

Thanks for your replies.

Say I earn 50k a year and spend say £30 on lunch per week (say 46 weeks) so that's £1380 my take home pay would be 50000-1380=48620-20% tax=£38896 assuming I have no other expenses is this correct?

If you're working for an umbrella, then yes your expenses will reduce your taxable pay. Your take home pay would be £38896 + £1380.

[Newbie Simon]

You may only apply those benchmark rates if you have dispensation from HMRC to do so.

You can however claim actual costs incurred, with receipts, as business travel expenses. 24-month rule applies.

There are benchmark rates for travel outside of the UK which do not require dispensation.

There's also a statutory rate for 'incidentals', no receipts required, if you have an overnight stay.

Thanks for your replies.

Say I earn 50k a year and spend say £30 on lunch per week (say 46 weeks) so that's £1380 my take home pay would be 50000-1380=48620-20% tax=£38896 assuming I have no other expenses is this correct?

[Contreras]

For anybody interested, there is a consultation in place at the moment that would effectively do away with dispensations and hopefully replace them with a more simple process. The details can be found in the link below:

https://www.gov.uk/government/upload...ion_180614.pdf

Thanks Martin.

TCP has already covered this at length, but just in case there remains denialdoubt in some peoples minds what the rules say in relation to P11D and expenses paid directly from the company account:

Current tax rules

2.2 Where an employer pays or reimburses a qualifying expense to their employee they are required to report that payment to HMRC at the end of the year on form P11D (and the employee must still make a claim to HMRC to receive their tax relief) unless that employer has a dispensation.

On the matter of scale rates, which currently can only be used with a dispensation:

5.23 It is unclear whether there is a pressing need for one person companies or very small, close companies to be able to pay a scale rate in respect of expenses. For such small employers there can be no real administrative saving from paying a scale rate rather than reimbursing themselves the actual amount of expenses incurred.

5.24 In order to protect against potential abuse of the exemption by some small companies the Government proposes that one person companies and directors of small, close companies would not be permitted to be paid a scale rate for expenses under the exemption (but this would not affect those companies paying a scale rate to other employees). However, the Government would like to hear from any small employers who would be affected by this proposal.

5.25 In particular the Government would like to understand the reasons very small employers use scale rates, in order to determine whether there should be any circumstances in which these employers should be able to pay a scale rate to their directors.

Responses by email to be submitted by 9 September 2014.

[Martin at NixonWilliams]

A lot of people find it easier as they can claim a flat sum rather than what they spend, so it saves keeping track of exact amounts.

True, although it is important to remember that the claims must be broadly in line with what is actually spent.

For anybody interested, there is a consultation in place at the moment that would effectively do away with dispensations and hopefully replace them with a more simple process. The details can be found in the link below:

https://www.gov.uk/government/upload...ion_180614.pdf

[Clare@InTouch]

I have a dispensation but not for scale rates. Is there really much advantage to scale rates unless you're a bigger organisation?

A lot of people find it easier as they can claim a flat sum rather than what they spend, so it saves keeping track of exact amounts.

[TheCyclingProgrammer]

Very much so. We used to apply and get them approved by all but one particular HMRC office, but these days we rarely get anything except a partial approval. They often won't approve use of scale rates without further proof now, and you have to go very careful with assuming that a dispensation will cover absolutely everything automatically.

I have a dispensation but not for scale rates. Is there really much advantage to scale rates unless you're a bigger organisation?

[Clare@InTouch]

Apparently, it's getting more difficult to have these approved for close companies.

Very much so. We used to apply and get them approved by all but one particular HMRC office, but these days we rarely get anything except a partial approval. They often won't approve use of scale rates without further proof now, and you have to go very careful with assuming that a dispensation will cover absolutely everything automatically.

[jamesbrown]

It's not that difficult to get a dispensation though.

Apparently, it's getting more difficult to have these approved for close companies.

[Scruff]

My dispensation took all of five minutes to complete the form.

[JB3000]

You may only apply those benchmark rates if you have dispensation from HMRC to do so.

True.

"An employer can opt to use the benchmark rates by ticking the appropriate box on form P11Dx or by stating their intention to use them in a dispensation letter. The request may be part of a new dispensation application or a revision of an existing dispensation."

EIM05230 - Employment income: scale rate expenses: subsistence expenses: advisory benchmark scale rate payments

[Wanderer]

You may only apply those benchmark rates if you have dispensation from HMRC to do so.

It's not that difficult to get a dispensation though.

[Contreras]

The benchmark scale rates that apply from 6 April 2009 are as follows:

...

You may only apply those benchmark rates if you have dispensation from HMRC to do so.

You can however claim actual costs incurred, with receipts, as business travel expenses. 24-month rule applies.

There are benchmark rates for travel outside of the UK which do not require dispensation.

There's also a statutory rate for 'incidentals', no receipts required, if you have an overnight stay.