Self Employed Overnight Subsistence

[roundthebend]

Hi all … I hope someone can help put me out of my misery of sleepless nights and panic attacks!!

For the last 8 years myself and my partner have been self employed supplying the products we make to independent retail stores. We were doing pretty well and expanding nicely until the very sudden downturn in the economy at which point our orders stopped dead (as though someone had turned a tap off) and we lost our home, workshops, website and possibly our sanity.

We are trying to get back on top but what is worrying me is that I can’t afford an accountant and I’m not sure if what we’re now doing is OK.

Basically we are claiming housing benefit and working tax credits while trying to get the business back on track (although I doubt it will ever be what it previously was). We are living in a 2 berth grotty caravan behind a pub with our dog and 2 birds while we use part of a friends single garage for manufacture!! … Housing benefit is £45 per week!

We cannot afford to exhibit at trade shows and so as we produce a collection we are loading it onto our 18 year old decrepit van (as we no have storage facilities) and heading off on the road selling directly to shops from the back of the van. We have to travel around 300 miles just to get us to the areas we need to sell to and then in order to keep costs to a minimum we stay on the road until the collection has sold.

At first we were staying on camp sites but even that has proved to be too expensive and so we sleep wherever we can … at the side of the road usually but occasionally on motorway services so we can use the showers etc.

My question is what is reasonable to claim as overnight subsistence whilst away from home. When we’re at home I spend around £50 per week at the supermarket. While we are away however, it is impossible to live on this amount unless we ate chip butties for breakfast, lunch and dinner. I seem to be spending an average of £120 per week whilst on the road … would this be reasonable? It sounds a lot but £18 per day for two of us when water is around £3 of that … Would it be reasonable to say that the difference ie. £70 is reasonable?

Thanks for looking and I hope someone can help.

[mullet]

Generally speaking, HMRC will allow the cost of an evening meal when incurred in conjunction with the cost of overnight accommodation incurred wholly and exclusively for the purposes of the trade. It does not matter whether the acxcommodation and meal costs are incurred together, but accommodation which costs is usually the gateway to the meal being allowable. But HMRC will allow people such as lorry drivers to claim for the cost of a meal without any accommodation cost (BIM47705), and I guess that you can fall within that category.

But as for other costs such as lunch, water etc - I don't think that you can claim anything. This follows the case of Caillebotte v Quinn, where it was established that the "eat to live" and "eat to work" elements could not be separated. This is harsher treatment than for employees, who can receive modest day subsistence when working away from the normal base.

[roundthebend]

Hi and thanks for your reply.

Gosh that seems harsh! ... It would seem that the HMCRs are punishing me for trying to keep my costs to a minimum whilst trying to re-establish the business.

Am I right in thinking that if I stayed in a TravelLodge (for instance) and paid £30 per night, I could then reasonably claim for a proper evening dinner at say £10. This would equate to £280 per week as opposed to £70 per week!!!

Sporry about the other post BTW ... Couldn't work out how to delete it.

[mullet]

HMRC would not be trying to punish you, just allowing what is due.

You can claim for the reasonable cost of an evening meal, in the same way that a lorry driver sleeping in his/her cab would be able to. What you cannot do is claim for £30 per night which you would be able to claim for using a Travelodge, but in reality sleep in the van and pay out nothing.

[roundthebend]

What I'm actually trying to do is re-establish the business as quickly and cost effectively as possible in order to become self sufficient again (rather than living on housing benefit and working tax credits).

The issue is this ... at home two of us live on around £7 per day for all meals and beverages. It is impossible to do this whilst living on the side of the road as we have nowhere to prepare or cook food. We also have no access to fresh drinking or washing water. When I say we are on the road, we are generally driving from 9am until 11pm at least ... sometimes later.

I am not saying I would like to claim £40 per night , having only spent £10 (even though employed people can choose this option), simply that I personally would have thought that £5 per person per day, for overnight subsistence and meal allowance, should be reasonable in the eyes of HMRC.

[mullet]

To be honest, up to £20 or £25 per person per night for an evening meal wouldn't cause HMRC to raise its eyebrow, so to speak. The only requirement is that the expenditure is reasonable (obviously a bit subjective). There is no "round sum" figure for overnight subsistence that self employed people can claim. Firstly the category of expenditure must be allowable (e.g. a bed for the night and a meal) and secondly the amounts must be reasonable (which rules out The Savoy and The Ivy). The overriding principle is that the expenditure must be incurred.

[roundthebend]

OK … so now I am trying to re-think my business plan. The original plan involved becoming self sufficient asap and then, as the economy is still dire in the UK, searching further afield, throughout Europe, for additional outlets.

The shops we supply are mid to high end independent gift and interior stores. I would think that the majority of their customers were those who lived beyond their means throughout the buoyant false economy. Such stores have obviously been devastated by the downturn and I believe will be among the last to recover.

Perhaps I should look at staying on benefits for a longer period and making European trips at the same time. If we loaded the van with our products and then travelled across to France, presumably we could stay on camp sites or even in hotels, claim for an evening meal and enjoy a quality of life in the sun whilst getting the business back on track (as opposed to living like peasants on the side of the road in the UK) ... perhaps we could even have evenings and weekends off!!)

So if £20 per head for an evening meal is perceived OK, would say £40 for accommodation be realistic do you think?

Thank you BTW for your help so far and making me think outside of the box … you may well have just changed my life and given me some hope of a less miserable future.

[mullet]

Perhaps I should look at staying on benefits for a longer period and making European trips at the same time. If we loaded the van with our products and then travelled across to France, presumably we could stay on camp sites or even in hotels, claim for an evening meal and enjoy a quality of life in the sun whilst getting the business back on track (as opposed to living like peasants on the side of the road in the UK) ... perhaps we could even have evenings and weekends off!!)

Sorry to possibly burst the bubble, but you are swiftly drifting towards "duality of purpose" here. Travel and subsistence for a business trip to Europe for a self employed person would be allowable, but when does it become both a business trip and either a holiday or normal day-to-day living?

So if £20 per head for an evening meal is perceived OK, would say £40 for accommodation be realistic do you think?

To be honest, that is probably on the low side compared to what most people incur. When travelling in the UK I sometimes use a Travelodge at £19 per night if I just need to get my head down, but sometimes I spend £100 per night (with food cost on top of that) in a proper hotel. Neither would be seen as unacceptable for a qualifying business journey.

[roundthebend]

I have been thinking all of this through a little further and wonder whether the following would be acceptable to HMRC.

We remain on housing benefit and working tax credits for at least the next financial year.

During the financial year all turnover is utilised in developing the business. This would involve returning to base for manufacture and then proceeding through the UK and on through France and possibly further to sell the products. Our residence and life is based here in the UK and we are only on the road for business purposes.

Whilst on the road increasing our outlet portfolio we would be perfectly entitled to a better standard of living than we have at home (think grotty 2 berth caravan behind a pub) and would therefore stay in a reasonably priced hotel and enjoy a reasonably priced evening meal (don’t want to be seen to be taking advantage).

Obviously we couldn’t increase the stock level during this period without declaring it as a profit but what about items such as replacement tools, advertising, promotional literature etc.?

[Incredulum]

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.