Reply to: Claiming HMRC's Abroad Room Rate if client paying accommodation expenses?

[NotAllThere]

Locked. Moved elsewhere.

[northernladuk]

I've not made up my mind or looking for anyone to reinforce the decision, I'm just asking if both cases are acceptable in the eyes of the law, as it appears that scenario 2 is perfectly legal too.

We often get people who want to do something post a question and then refuse to listen to the answer just like this so it certainly looks like you've made your mind up and are trying to convince us you can do it, which you won't.

When you say I was daft to post in General, is this just because it should have been posted in Accounting / Legal instead? or any other reason.

Well it's an accounting question so hey, why not post it in the accounting section? Seems like common sense no? Also we have little sub headings under the forum names to help.

Accounting says - Financial and legal issues affecting IT contractor companies, including IR35.
General says - All hope abandon ye who enter here. Seriously.

Which one do YOU think it should have gone in?

Why are you not asking your accountant? You appear to be avoiding this step which makes us think you are, again, trying to game the system or don't have one. Either of those isn't very smart.

[malvolio]

I'm not trying to game the system, I'm trying to understand the basics as I'm new to this, including what can and cannot be claimed and the rules. If I was trying to game the system or had an intention to, I wouldn't post it here online for all to see.

You've been told several times in several ways that you can only reclaim as much money as you have personally spent on strictly business-related stuff. If you are recharging it, and its being paid in full, you don't have a claim. If you have paid for it and then reclaimed the total cost through YourCo, then you get all the money back, no taxes are due and YourCo can recover the VAT element. It's really not that hard. In the scenario you quoted in your original post, you have no reason or justification for using scale rates since it is not your money that's involved.

If you are in fact funding expenses out of your day rate - that is, not recharging them to the client - then you may have a case for using scale rates, which only means that you don't have to mess around with tax declarations but take a flat repayment from YourCo. If the scale rates exceed your actual expenditure then you may make a small profit on the transaction but if HMRC notice and start asking questions they may well conclude you are acting fraudulently by artificially inflating your recovery of expenses. And if they do then you are in a world of pain.

Scale rates, as has been said, are there to simplify expenses where lots of small amounts mean lots of separate receipts and, quite often, situations where no receipt can readily be produced. They are not a free money tree.

The whole basis of the UK taxation system is that you declare things accurately and reasonably (which has a legal definition, incidentally). What you are asking to do is not reasonable.

We also asked what your accountant thought about several times. since you haven't answered that one, we assume you don't have one. Given your apparent lack of knowledge, that is also a concern... or damn well should be.

[jamesbrown]

I'm just asking if both cases are acceptable in the eyes of the law, as it appears that scenario 2 is perfectly legal too.

You’ve been told multiple times by multiple people that it isn’t, so we’re starting to think that you’re either a bit thick or trolling.

Yes, General is the place where we call a cretin a cretin. The professional forums, like Accounting, are where we say it politely.

[pennywisetrading]

As this is in general:



Paid



The intention of the HMRC rates is not to enable employees to turn a profit but to simplify expenses. Some companies prefer to pay out a fixed rate per day for accommodation and incidentals and the HMRC guidance is there to say "these are acceptable limits and if you pay more than that then you need to account for it as a BIK".

Expenses should be reimbursed where the employee has incurred a cost on behalf of their employer in the course of performing their duties.

If you haven't incurred an expense, then it would be fraudulent to claim it.

If you feel that you could justify to HMRC in the event of an investigation that your use of their published room rates was appropriate then go ahead. It sounds like you're determined to anyway and are looking for someone to reinforce a decision you've already made.

Now we've gotten to the crux of your aims, I think it's officially open season on this thread (I'm sure AtW won't mind me saying that) as you were daft enough to post in General rather than one of the professional boards.

I've not made up my mind or looking for anyone to reinforce the decision, I'm just asking if both cases are acceptable in the eyes of the law, as it appears that scenario 2 is perfectly legal too.

When you say I was daft to post in General, is this just because it should have been posted in Accounting / Legal instead? or any other reason.

As I mentioned, I'm new to this forum and this was my first post.

[pennywisetrading]

The point of my earlier short and very simplistic post on how to look at expenses was meant to make you think about what it is they actually represent. Clearly that was a waste of effort. So perhaps you could try the empirical approach. Write out your proposed scenario and show it to your accountant for an informed opinion.

Or stop wasting our time with circular discussions on how to game the system.

I'm not trying to game the system, I'm trying to understand the basics as I'm new to this, including what can and cannot be claimed and the rules. If I was trying to game the system or had an intention to, I wouldn't post it here online for all to see.

[northernladuk]

So in the future, if my end client payed me a set rate which did not include accommodation and I payed for accommodation costs myself, then it would be okay to claim the abroad room rate HMRC set?

Because isn't that a kind of loop hole? example:

SCENARIO 1:
Contractor Bob working abroad, charges his end client £200 per day + £50 per day for accommodation = £250 per day that end client has to pay.
In this case, Bob cannot claim HMRC's room rate too since accommodation is also covered by his end client.

SCENARIO 2:
Contractor Bob working abroad, charges his end client £250 per day (no accommodation included) = £250 per day that end client has to pay.
In this case, Bob can claim HMRC's room rate too since it's not covered by the client and he will pay it himself.

So for the end client, the bill/invoice is the same, so they won't mind either scenario, but for Bob, scenario 2 is better...? or am I missing something?

Because in Senario 2, Bob gets his rate of £250 from the client which covers his rate and accommodation but then he also gets HMRCs room rate too...

The desperation and greed in this one, strong it is.

[ladymuck]

So in the future, if my end client payed me a set rate which did not include accommodation and I payed for accommodation costs myself, then it would be okay to claim the abroad room rate HMRC set?

Because isn't that a kind of loop hole? example:

SCENARIO 1:
Contractor Bob working abroad, charges his end client £200 per day + £50 per day for accommodation = £250 per day that end client has to pay.
In this case, Bob cannot claim HMRC's room rate too since accommodation is also covered by his end client.

SCENARIO 2:
Contractor Bob working abroad, charges his end client £250 per day (no accommodation included) = £250 per day that end client has to pay.
In this case, Bob can claim HMRC's room rate too since it's not covered by the client and he will pay it himself.

So for the end client, the bill/invoice is the same, so they won't mind either scenario, but for Bob, scenario 2 is better...? or am I missing something?

Because in Senario 2, Bob gets his rate of £250 from the client which covers his rate and accommodation but then he also gets HMRCs room rate too...

As this is in general:



Paid



The intention of the HMRC rates is not to enable employees to turn a profit but to simplify expenses. Some companies prefer to pay out a fixed rate per day for accommodation and incidentals and the HMRC guidance is there to say "these are acceptable limits and if you pay more than that then you need to account for it as a BIK".

Expenses should be reimbursed where the employee has incurred a cost on behalf of their employer in the course of performing their duties.

If you haven't incurred an expense, then it would be fraudulent to claim it.

If you feel that you could justify to HMRC in the event of an investigation that your use of their published room rates was appropriate then go ahead. It sounds like you're determined to anyway and are looking for someone to reinforce a decision you've already made.

Now we've gotten to the crux of your aims, I think it's officially open season on this thread (I'm sure AtW won't mind me saying that) as you were daft enough to post in General rather than one of the professional boards.

[malvolio]

So in the future, if my end client payed me a set rate which did not include accommodation and I payed for accommodation costs myself, then it would be okay to claim the abroad room rate HMRC set?

Because isn't that a kind of loop hole? example:

SCENARIO 1:
Contractor Bob working abroad, charges his end client £200 per day + £50 per day for accommodation = £250 per day that end client has to pay.
In this case, Bob cannot claim HMRC's room rate too since accommodation is also covered by his end client.

SCENARIO 2:
Contractor Bob working abroad, charges his end client £250 per day (no accommodation included) = £250 per day that end client has to pay.
In this case, Bob can claim HMRC's room rate too since it's not covered by the client and he will pay it himself.

So for the end client, the bill/invoice is the same, so they won't mind either scenario, but for Bob, scenario 2 is better...? or am I missing something?

Because in Senario 2, Bob gets his rate of £250 from the client which covers his rate and accommodation but then he also gets HMRCs room rate too...

The point of my earlier short and very simplistic post on how to look at expenses was meant to make you think about what it is they actually represent. Clearly that was a waste of effort. So perhaps you could try the empirical approach. Write out your proposed scenario and show it to your accountant for an informed opinion.

Or stop wasting our time with circular discussions on how to game the system.

[pennywisetrading]

So in the future, if my end client payed me a set rate which did not include accommodation and I payed for accommodation costs myself, then it would be okay to claim the abroad room rate HMRC set?

Because isn't that a kind of loop hole? example:

SCENARIO 1:
Contractor Bob working abroad, charges his end client £200 per day + £50 per day for accommodation = £250 per day that end client has to pay.
In this case, Bob cannot claim HMRC's room rate too since accommodation is also covered by his end client.

SCENARIO 2:
Contractor Bob working abroad, charges his end client £250 per day (no accommodation included) = £250 per day that end client has to pay.
In this case, Bob can claim HMRC's room rate too since it's not covered by the client and he will pay it himself.

So for the end client, the bill/invoice is the same, so they won't mind either scenario, but for Bob, scenario 2 is better...? or am I missing something?

Because in Senario 2, Bob gets his rate of £250 from the client which covers his rate and accommodation but then he also gets HMRCs room rate too...

[ladymuck]

Interesting this!
I will need to go for 10 day trip to visit a client abroad.

So far I have always reimbursed myself for 3 meals a day + transportation based on receipts from restaurants/tickets.

I stayed in a hotel for free, so no hotel expenses.

Looking at the rates though it will benefit me more if I take the above as scale rate expenses and dont bother collecting and collating invoices (real pain in the back at 7-8 per day). I will be like twice better off.

It seems the very simple rule above is not quite right.

Technically, claiming for meals is a grey area as the the requirement to eat is not wholly and exclusively for the purposes of trade or employment.

[gisp]

There's a very simple rule about legitimate expenses. If you make a net profit perosnally, you're doing something wrong.

Interesting this!
I will need to go for 10 day trip to visit a client abroad.

So far I have always reimbursed myself for 3 meals a day + transportation based on receipts from restaurants/tickets.

I stayed in a hotel for free, so no hotel expenses.

Looking at the rates though it will benefit me more if I take the above as scale rate expenses and dont bother collecting and collating invoices (real pain in the back at 7-8 per day). I will be like twice better off.

It seems the very simple rule above is not quite right.

[jamesbrown]

The room rate expense does occur as I have to pay for hotels/accommodation...

Nonsense, further details here.

Sounds like eek was right...

[Lance]

There's a very simple rule about legitimate expenses. If you make a net profit perosnally, you're doing something wrong.

your LTD making a profit is absolutely fine though.
I have many times made a profit of expenses into my company. My personal expense claims with the my company are always 100% above board.

[ladymuck]

The room rate expense does occur as I have to pay for hotels/accommodation...

You claim the rate you paid or the room rate. Not both. It's a rate designed for scenarios where it's hard to get an invoice.

Your client is reimbursing your LtdCo for the expenses incurred so you are not actually incurring any expense that you need to claim from your LtdCo.

Even if the client wasn't reimbursing your LtdCo, your LtdCo could still deem the accommodation expense as wholly and necessary and claim tax relief but you as an individual couldn't claim the room rate because your LtdCo is covering the cost. You personally are not going to be out of pocket.