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Where Taxpayers and Advisers Meet

Travelling in style

Oldtramp
Posts: 16
Joined: Sun Mar 26, 2017 7:20 pm

Travelling in style

Postby Oldtramp » Fri May 10, 2019 9:33 pm

I consult and lecture internationally as a sole trader. Most clients provide tickets and accommodation, so 80-90% of turnover is profit. I include outgoings and corresponding reimbursements from non-commercial work (e.g. lectures for professional societies) in my accounts; it’s simpler than keeping separate commercial / non-commercial books and prevents complications when work is a mix of commercial and non-commercial. Having partly retired from the PAYE-taxed day job I find more situations that blur the edges. Two examples:

1) Prof X invites me to his 3-day meeting in Portugal. He’ll provide hotel and meals plus Euro 200 to cover Ryanair. Work is an hour’s lecture, a session to chair and providing discussion in other sessions; not arduous. In reality I’ll fly out TAP (Euro200), explore local mountains for a few days, do the meeting, then return on the sleeper (Euro350). It’s more fun. Hotels in the mountains are clearly holiday, but how about the travel? I need to get to the meeting, so can I book Euro 550 costs vs. 200 income = 350 net loss into my accounts. Or do HMRC likely see the whole trip as a holiday?

2) A US society invites me to speak. They provide hotel and meals and $1800 for economy travel. In reality I sail on the Queen Mary 2, taking the wife, then return on frequent flier miles, paying assorted surcharges and 2 nights hotel between arrival and the meeting start. Costs are $6000 (say), half attributable to me = $3000. Company Y, knowing I’m in the US early, seeks a consult, paying $2000; Company Z, for whom I have retained consultancy wants time too. So, I’m working steadily and the trip is profitable in isolation ($800 up). HMRC would allow business class flights without demur, but will they see Cunard - cheaper - as a week’s disallowable cruise?

bd6759
Posts: 3069
Joined: Sat Feb 01, 2014 3:26 pm

Re: Travelling in style

Postby bd6759 » Sat May 11, 2019 12:10 pm

There is nothing blurred. Both those trips are holidays.

The only test to apply is whether the expense is incurred wholly and exclusively for the purposes of the trade. That means the trade purpose must be the only purpose. If you take you wife on a cruise, or go hiking in the mountains, the cost of travel is not solely for the trade. There is plenty of judicial guidance on this.

Oldtramp
Posts: 16
Joined: Sun Mar 26, 2017 7:20 pm

Re: Travelling in style

Postby Oldtramp » Thu May 16, 2019 1:42 pm

Thanks. I thought that might be the case, though I can find assertions that, so long as journeys are booked separately, whichever one abuts the business part of a trip remains legitimately claimable against tax -- e.g.:

https://www.accountsnet.co.uk/business-travel-abroad/
https://blog.fairfx.com/travelling-for-business/mix-business-leisure-right-side-hmrc/

Just 2 follow on questions if I may: (a) do the Euro 200 and USD 1800 travel reimbursments count as taxable income in my examples above and (b) in my original case 2 is the sole issue the fact that my wife would accompany me------ the time in the US will all be spent working and the QM2 provides a regular direct (if slow and v comfortable) non-stop transatlantic service - there was a time when her predecessors, on exactly this route, were the standard route of business travel to the US.

bd6759
Posts: 3069
Joined: Sat Feb 01, 2014 3:26 pm

Re: Travelling in style

Postby bd6759 » Sat May 18, 2019 12:14 pm

Booking separately makes no difference at all. It is nonsense to suggest that an outbound journey could be allowable but the return journey not. Either the journey as a whole is allowable or it is not. Whoever wrote that piece is making up rules that do not exist.

FairFX is a foreign exchange website. I wouldn't rely on them for tax advice. Their article appears to be referring to employees, and quotes the general employee expense rule of "wholly exclusively and necessarily ... in the performance of the duties". What they don't say is that for travel the rule is more relaxed. All that is required is that the cost is "necessary." If "Katie" is an employee then she can quite legitimately add a couple of days to the end of her business trip because the travel was necessary (there is no duality to consider). The article is simply wrong.

Its all fact and degree. Adding a couple of days to week long business trip is different from adding a week to a couple of days business trip.

DavidTreitel
Posts: 195
Joined: Thu Aug 16, 2012 4:31 pm

Re: Travelling in style

Postby DavidTreitel » Mon May 27, 2019 2:05 pm

The work in the United States will necessitate the filing of a US Federal (and possibly one or more State) income tax return. Whether or not there will be US tax due will be a question of facts and circumstances.


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