Business class upgrades for flights

[jason13]

I was idly wondering about a question the other day and wanted to get people's opinions here. What if an employee has a lot of travel for work but company policy only allows flights in economy class. The employee, due to the amount of travel, pays for upgrades to business from time to time out of their own pocket. Is that an allowance expense?

In the meantime, I actually found two forum posts that deal with the question and the consensus seems to be that this is an allowed expense but there is some uncertainty around it. Has anyone here actual experience with such claims being accepted or rejected by HMRC?

Here are the links: https://www.flyertalk.com/forum/u-k-ireland/1624356-upgrade-fees-tax-deductible-paye-1.html
https://www.taxation.co.uk/Articles/2018/01/16/337478/readers-forum-flight-fancy

I guess if someone is self-employed (instead of on PAYE) this would be allowed for sure, as long as it's justifiable and wholly and exclusively a work trip.

[pawncob]

As an employee he's subject to "wholly, exclusively and necessarily" rules. I can't see any reason to disallow it if the expenditure helps him perform his duties in a more efficient manner.

[robbob]

Surely if the company is refusing to pay for the upgrade then the upgrade isn't necessary ?

[AdamS93]

If paid for by employer it would be okay.

If paid for by the employee it will need to be wholly, exclusively and necessarily incurred for the reason of employment. You will struggle greatly on the 'necessarily' part as the flight will take you to the same place regardless of where you are sitting in business class or economy.

[bd6759]

Those saying "no" need to read the legislation (s337 and s338 ITEPA).

There is no wholly and exclusively test, only a necessary test. But the necessary test does not apply to the amount of the expense, it applies to the journey. If the journey is necessary, the cost of that journey is allowed.

Otherwise, any fare other than the cheapest would not be allowed whether paid by the employer or not.

[robbob]

bd6759
Looking at 337 and 338 per the above links both these sections also contain mention of the employee being "obliged to incur and pay" the expense - what are your thoughts in this regard if the company is refusing to pay so there is no obligation of the individual to incur this specific expense?



from 337
(

1)A deduction from earnings is allowed for travel expenses if—
(a)the employee is obliged to incur and pay them as holder of the employment, and
(b)the expenses are necessarily incurred on travelling in the performance of the duties of the employment.

from 338

(1)A deduction from earnings is allowed for travel expenses if—
(a)the employee is obliged to incur and pay them as holder of the employment, and
(b)the expenses are attributable to the employee’s necessary attendance at any place in the performance of the duties of the employment.

[AdamS93]

bd6759
Looking at 337 and 338 per the above links both these sections also contain mention of the employee being "obliged to incur and pay" the expense - what are your thoughts in this regard if the company is refusing to pay so there is no obligation of the individual to incur this specific expense?



from 337
(

1)A deduction from earnings is allowed for travel expenses if—
(a)the employee is obliged to incur and pay them as holder of the employment, and
(b)the expenses are necessarily incurred on travelling in the performance of the duties of the employment.

from 338

(1)A deduction from earnings is allowed for travel expenses if—
(a)the employee is obliged to incur and pay them as holder of the employment, and
(b)the expenses are attributable to the employee’s necessary attendance at any place in the performance of the duties of the employment.

I agree.

With regards to necessarily, it hasn't been necessarily incurred on travelling in the performance of the duties. If the employer has paid for an economy seat, then if the employee pays from their own pocket for an upgrade is has not been 'necessary' for them to do so.

If the employer didn't pay for the flight at all then the outcome may be different.

[bd6759]

Why would it be different:

You are proposing:

Employer buys first class - cost is allowed
Employee buys first class - cost is allowed
Employer buys economy and employee upgrades - upgrade not allowed.

The same legislation applies to all these scenarios, yet you suggest that it needs interpreted differently for different scenarios.

The legislation is very clear that the obligation is to incur a cost on travelling. The legislation cannot apply to the amount otherwise only the cheapest fare would ever be allowable. HMRC would enquire into every tax return to ensure that the cheapest option was obtained.

Try Rickets v Colquhoun:
"they must be expenses which the holder of an office is necessarily obliged to incur – that is to say, obliged by the very fact that he holds the office, and has to perform its duties – and they must be incurred in – that is, in the course of – the performance of those duties."

And Pook v Owen:
"But this does not mean that no expenses can ever be deductible unless precisely those expenses must necessarily be incurred by each and every office holder. The objective character of the deductions allowed relates to their nature, not to their amount."