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Subsistence allowance question

I have a client company who, for reasons of simplicity and reducing paperwork, pays its employees and subcontractors a flat rate of £60 p.w. when working away from home.  This is taxable on the recipients so is largely neutral from HMRC's point of view, give or take any differences in tax rates. The company pays the accommodation costs direct, usually in Travelodges.

I also act for a couple of the subcontractors - if they provide receipts, can they claim the actual costs of meals etc. against this £60 p.w. ?  And can they claim anything without receipts ?  Seems as though if they cannot, then nobody is getting the tax relief on these legit expenses.

Anyone ese come accross this, or have any opinions ?

Thanks.

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05th Dec 2012 15:19

subsistence allowance

Unfortunately, HMRC's view is that there is no such allowance for the self-employed. They rely heavily on the tax case of Caillebotte v Quinn (see HMRC's guidance at BIM37920) that the meal is in order to live, not to work so fails the 'wholly and exclusively' test. In my experience, HMRC will allow meals for occasional breakfast costs for very early morning starts and dinner costs for very late finishes but only when such start/finish times are demonstrably out of the ordinary. HMRC seem to interpret "out of the ordinary" as "rarely" so for the number of occasions it could be allowed, it's hardly worth the effort.   

There has been some speculation in recent years that the self-employed rules will be relaxed to align with the subsistence allowances for employees but I am not aware that this has actually happenned yet.   

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05th Dec 2012 18:14

Thanks Brightster

Upon reflection, I think the £60 pw allowance is a bit of a red herring and should just be considered as extra wages (partic. as 20% CIS tax is deducted).

In which case we come down to a simple question of allowability and I agree with what you say.  Personally, I've always thought that the additional cost of meals when working away from home should be allowable, over & above what a meal would cost at home.

But presumably if the company paid the meals when included on the hotel bills there would be no argument ?

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06th Dec 2012 09:29

Meals

If the company pays the accommodation costs, which includes the meals for all workers (both employees and subbies) then I agree that there should be no argument.

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Actually...

... the self-employed can claim subsistence expenses under S.57A ITTOIA 2005 if:

their travel expenses would be allowable, andtheir trade is by its nature itinerant (which is generally the case for subbies, who will move on to another site when the current project finishes).

See also BIM37670 and the Tim Healy case.

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07th Dec 2012 18:13

Thanks, Steve and Brightster.....

.............for that clarification.

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