Self Employed Overnight Subsistence

[roundthebend]

I am not certain that you understand the difference between cash and profit.

As for your business plan, if it is costing you £150 per night in a hotel, it's still costing you £150 per night, even if it's tax deductible.

I don't understand how you become wealthy and live a hotel-lifestyle when on the road, but in a caravan behind a pub when at home.

Hi Incredulum and thanks for your reply although I regret I don't understand it and I'm not sure I even mentioned £150 per day.

You might like to know that prior to losing everything in the economic downturn I lived in a 4 bed detached house, had my own shop, supplied in the region of 200 shops, sold from major trade shows and whilst at such trade shows stayed in very comfortable hotels. Prior to this I was employed by a multi national company at middle management level for 14 years.

Since losing everything my life has been pretty much hell on earth but somehow I have managed to find the energy to try again. Yes I am on benefits for the first time in my life and beleive me I went through hell and being treated like some some sort of criminal lesser being, whilst securing what I was entitled to. I intend to utilse the very few benefits I am legally entitled to whilst attempting to get my business back on track.

I realise that the advice on here is free and I am very grateful for this. I have always paid my way in the past and fully intend to again in the future. Right now though I need all the free help I can get in attempting to get back on track without doing anything illegal, either deliberately or in ignorance.

Perhaps I should explain the difference between my original plan and the one I'm now considering and then you can decide if you'd like to help me or not.

The original plan involved living like a peasant... sleeping on the side of the road whilst away and living on a poxy £18 per day for 2 adults. Apparently HMRC could have problems with this, which would mean our attempting to live on only £10 per day.

The plan I am now considering is living a slightly more comfortable lifestyle whilst trying to get back on track, although with the extra expenditure this would take longer. Essentially, all I am trying to do is find out what is allowed and what isn't in the eyes of HMRC.

[Incredulum]

I still don't understand where all this extra money is coming from.

HMRC don't care, particularly, how much you spend. All they care is what you spend it on.

So your (reasonable) evening meals and hotel costs are deductible whilst your lunch and water throughout the day are not.


If you spend more, you certainly pay less tax, but you take home much less money.

Have you thought of buying water in 6 packs of 2 litres?

[roundthebend]

I still don't understand where all this extra money is coming from. I didn't say I would stay in a hotel every night ... the more outlets we get on board the more we sell and thus our takings increase ....

HMRC don't care, particularly, how much you spend. All they care is what you spend it on. If that is the case (and I doubt it is)then perhaps I should check out the Paris Hilton whilst on business trips in France

So your (reasonable) evening meals and hotel costs are deductible whilst your lunch and water throughout the day are not. That is fine as my lunch and water can come out of the Working Tax Credits

If you spend more, you certainly pay less tax, but you take home much less money. It is not so much a question of taking home less money ... more not losing the benefits which are enabling me to re-establish my business. If I have to live a less comfortable lifestyle, for a longer period in order to achieve a business that is less likely to fail again in the future, (due to more solid foundations having been laid) then so be it.

Have you thought of buying water in 6 packs of 2 litres?

Have you thought of a second job as a stand up comedian?

I know that you are giving your time FOC here but am a little unclear of your intentions. Have you actually read the thread from the start and followed the flow or simply made sweeping assumptions based on reading between the lines of the last couple of posts?

[Incredulum]

Are you for real? Either you cannot afford the cost of camping:

At first we were staying on camp sites but even that has proved to be too expensive and so we sleep wherever we can

or you're proposing staying in hotels - even the Hilton (though I appreciate that may be tongue in cheek):

then perhaps I should check out the Paris Hilton whilst on business trips in France

I don't doubt you had a business that made you plenty of money in a boom. And I don't doubt you make very nice products. But it seems to me that you don't understand money, tax or profits. Just because you're getting a tax deduction doesn't mean you're not spending the money.


Or is there more to it; is this a benefits scam? If you spend all your self-employed gross income on living in a hotel, then they continue your benefits? I think there's a duality of purpose if you do this; the reason for staying in the hotel is to provide yourself with somewhere to live - furthering the business becomes a secondary purpose.

[mullet]

The original plan involved living like a peasant... sleeping on the side of the road whilst away and living on a poxy £18 per day for 2 adults. Apparently HMRC could have problems with this, which would mean our attempting to live on only £10 per day.

I think the issue here is an apparent belief that, whilst working/engaged in business activity, HMRC should fund you through allowable expenses. As Incredulum has said, regardless of whether expenditure is tax deductible you have to spend it first - so you have to have sufficient income to fund that expenditure.

In my opinion there are huge issues here about duality of purpose. When does a business trip become a dual purpose trip? Probably when there is more than incidental private or leisure time.

[roundthebend]

Hi Incredulum ... Yes it was tongue in cheek as was my suggestion that you do "Stand Up"! ... I apologise for my delay but having anticipated the tone of your response I was trying to go back to basics and formulate my plans and questions in a more ordered structure. So ... Here goes ...

Plan 1

Claim HB and WTC to ensure we have a roof over our heads and food while re-establishing the business.

Sink ALL turnover back into the business for as long as it takes to get the business back on track.

Key Point In Plan 1

Keep overheads to an absolute minimum which involves sleeping on the side of the road and eating a combination of (healthy) takeaways and supermarket food, grazing throughout the day as we are on the road for such long hours. Such a lifestyle is not conducive to a healthy mindset and this could only be considered for a short period of time.

Direct Blow

HMRC would not be happy with my claiming £5 per person per day to make this option in any way bearable. Instead they will want to see receipts for “Evening Meals”.

The balanced and helpful responses I received from msp however, made me reconsider my plan (this I believe to be good business practice as tunnel vision can often lead to a lethal side on impact).

Plan 2

Claim HB and WTC to ensure we have a roof over our heads and food while re-establishing the business (same as Plan 1)

Sink ALL turnover back into the business for as long as it takes to get the business back on track (same as Plan 1)

Key Point In Plan 2

Make the lifestyle during the business development more bearable so that it matters less that the foundations of the business take longer to lay.

Important NB

During the first 6 months of losing everything I tried to go it alone. I had no money, was nearly evicted from a camp site and spent the winter living on bread and jam with holes in my boots while I stood on ice on an outside market for hours on end. The ice was on the inside of my boots BTW.

It was only through a chance meeting with an immigrant that I learned I was entitled to Working Tax Credits and Housing Benefit. When I tried to claim back pay, I was told “NO” and that “Ignorance of the benefits system is no excuse for not making a claim”.

As I have said previously in this thread I am only trying to work out what is allowed and what is not. During this difficult climate I am reluctant to let go of that to which I am entitled, until I am certain I can manage to “live” off the business once again.

Loose 12 Month Plan Would Be

Manufacture products at base … load up vehicle … sell to exisiting outlets and then look for new outlets. Biggest expenditure BTW is fuel. Then return to base and repeat.

Whilst on the road, instead of living like peasants at the side of the road we stay in modest comfort and have a reasonable meal. Obviously we can only do this by utilising revenue that isn’t otherwise accounted for. I am sure that certainly at first there will still be lots of sleeping at the side of the road.

The next step is something I have changed since the reconsidering of the plan. Previously, in an attempt to get back to self sufficiency asap (remember the biggest issue with Plan 1 was that it could only be endured short term) once the next collection is produced we re-visit the existing outlets. I am now thinking we give them the opportunity to buy online instead, reducing the need for re-visits, saving fuel and allowing more time and free revenue to travel further afield and increase the outlet portfolio.

The plan would be at the end of the 12 months the foundations are built and I … sorry “We” can come off benefits, stop or cut right back on the travelling and hopefully rely on repeat online orders for a modest income whilst developing the business further as necessary.

Would this be legal or not in the eyes of HMRC and would this be (as you so delicately put it) a Benefits Scam!!!! or not.

[roundthebend]

Sorry ... I am having formatting problems so the last half of last post is not particularly well presented.

[Incredulum]

I know nothing about benefits, and I've had a look at the HMRC website which is pretty opaque but suggests that you don't get them if you earn over 17k(?). That equates to £47 per day. As I understand they fall off the more you earn, I guess you're earning quite a bit less than that. It just doesn't stack up for me that you are looking to spend £100 a night on a hotel when the business is - apparently - creating no profit at all.

Direct Blow
HMRC would not be happy with my claiming £5 per person per day to make this option in any way bearable. Instead they will want to see receipts for “Evening Meals”.

This is nutty. The financial benefit of claiming £5 per day, in tax terms, for a basic rate taxpayer is £1 of tax per day. On the grounds you're on the road for maybe 200(?) days a year, you're complaining about not being given £200. And yet.... you want to spend £100 a night on a hotel. That's (partly) why your story doesn't seem to stack up.

[roundthebend]

In my opinion there are huge issues here about duality of purpose. When does a business trip become a dual purpose trip? Probably when there is more than incidental private or leisure time.

Hi again msp and thanks again for your time. I hope I have covered the first part of your response in my last post. This whole thing is really worrying and I don't want to get it wrong. Nor however, do I want to pass up the outside possibility of an easier life without question.

Does my last post cover the duality of purpose any better? ... How would this situation work for say a self emplyed Sales Agent as essentially that's what we become whilst on the road?

Incredulum ... Taking snippets out of context and blowing them out of all proportion is most unhelpful!!

[mullet]

Does my last post cover the duality of purpose any better? ... How would this situation work for say a self emplyed Sales Agent as essentially that's what we become whilst on the road?

TBH it doesn't really help. Said sales agent might be abroad for a week or two, but would surely return to base very regularly. He/she would have some sort of domestic base with belongings, family etc. If I understand you correctly, you are envisaging going abroad for some time (weeks? months?) and wanting to claim all living costs (or at least accommodation and evening meals) as tax deductible.

The system simply does not work like that. The strict position is that dual purpose expenditure is disallowable. End of. But if a sensible and fair (to both sides) apportionment can be made, then that is what happens. The simplest example is (say) a self employed financial advisor who visits clients in their own homes. On the basis of a reliable mileage record (which they all keep of course) motoring costs can be apportioned between business and non-business. In practice the private element may well be estimated. (He says, 10%, HMRC says 75%, they agree somewhere in the middle and he is told to keep better records in the future).

What you are proposing is so different, in that your whole life would transfer abroad for a period of time. Not only that, but to a significant extent you would be enjoying a better standard of living than in the UK. It doesn't really make sense from a practical point of view, and it is likely to be unacceptable to HMRC.

It has been interesting considering the different angles though.