What you can and cannot claim

An expense is the cost of operations that a company incurs to generate revenue. Legitimate expenses can be claimed against tax providing certain criteria are met. It can be a complicated topic, with different rules for different circumstances, so here we’ve looked at the some of the basics when it comes to claiming against tax for subsistence, travel and entertainment expenses.

Subsistence (in other words food and drink) can be claimed against tax if you are travelling on a journey outside of your normal pattern of work, perhaps to visit a client. Here, you can claim for ‘reasonable’ amounts of subsistence during the time of your journey. A sandwich purchased from a garage will be fine, a five-course meal at the Ritz will not!

Determining if you can claim for subsistence is based on the premise that everyone has a ‘normal place of work’, for example an office. So, buying food and drink on the way to and from your office (normal place of work) or during the day when you are at the office, cannot be claimed as a business expense, however subsistence while travelling to a client can be.

If you don’t have a fixed place of work, perhaps you run a van franchise or sell to retailers and spend your time on the road, then subsistence can be claimed while you are at work. However, your main grocery shop bought on the way home cannot.

When it comes to accommodation, hotel costs while travelling ‘necessitated by the trade’, where you are away from your normal place of work is allowable. An evening meal if staying away would also be permissible. However, if you took your family away with you, only your accommodation could be claimed against tax and only your subsistence, not theirs. If you are taking family on an away trip you would also need to be able to prove it was a genuine business visit and not just a short holiday!

Mileage or travel expenses fall under similar rules. If you travel to your normal place or work, then mileage or train travel is not permissible. However, travel to visit a client, exhibition, supplier or anywhere which is not your normal place of work is allowable. For car travel it’s 45p/mile for the first 10,000 miles then 25p/mile thereafter.

Entertainment is slightly more complicated. It is divided into two distinct areas: firstly: customers and suppliers and secondly: staff. Entertainment, for customers and suppliers, such as the cost of taking them out to lunch is deemed a legitimate business expense for the trade, however, for tax purposes it is disallowed. In other words, the cost can be claimed against net profit, but the business does not receive tax relief on the cost.

Entertainment of staff on the payroll, however, can be claimed against tax. This includes annual events such as Christmas parties if certain criteria are met. In this way, £150 per person per year can be claimed. Events such as parties need to be ‘open to all’, in other words not just restricted to the directors. The £150 can also cover the provision of a ‘plus one’ for each staff member. Anything up to the £150 per person per year is allowable, but be careful, because anything over that amount may give rise to a taxable benefit on the employee. Taking staff out to lunch is separate and classed as incidental and allowable if the expense claim is not excessive.

It’s important to talk to your accountant to be certain of precisely what can and cannot be claimed against tax. Or why not give d&t a call? Our experts are always happy to help new clients and share their knowledge about best practice accountancy to optimise business success.

For further information please see: www.team-dt.com

Originally published by Franchise World page 14 https://drive.google.com/file/d/16tTbzEbbRJaZLqOnwVVvoIVRPD0-uvFF/view