Travelling from abroad allowable?

Travelling from abroad allowable?

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 A non-UK resident director of a UK company travels frequently to the UK to attend his company's business. Is travelling and accomodation allowable if the company pays for it?

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By frustratedwithhmrc
08th Feb 2011 10:02

Wholly and Exclusively?

Since he is an officer of the company, it is perfectly reasonable for his travelling expenses to be paid and tax deductable provided they are "Wholly & exclusively" in relation to the business. If there is some element of personal use (i.e. once in the UK he spends the week playing golf before returning home), then obviously there is a personal / private element which needs to be excluded.

I am assuming that the UK company hired him as a non-UK resident director and there are no contractual terms preventing him claiming and being paid such expenses. 

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By TaxationPete
08th Feb 2011 11:01

Un Clear

This sounds as if he is a driector of his own UK company and choses to live abroad. His place of work would be the company in the UK. What business does he have abroad that is associated to the UK company. Regards Peter

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By frustratedwithhmrc
08th Feb 2011 11:20

Interesting point

My initial reading was that this was 'just another director' who happened to be UK non-resident. Obviously if this was a sole director of a UK limited company, then that would open a whole can of worms.

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By constantinesavva
08th Feb 2011 11:21

director not a UK resident

 The director is non-Uk resident (never been), he has businesses in another EU country and he is setting up in england.

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By frustratedwithhmrc
08th Feb 2011 11:42

In which case...

Although the expenses would appear to be wholly and exclusively in relation to the setting up of a business in the UK, if he is a European resident, then he needs to make sure he is not subject to the Controlled Foreign Companies legislation that is applicable to whichever country he/she is operating from.

If the day-to-day operations were handled by a UK resident employee or director, this would not be a problem, but in the event that a non-UK director is the sole controlling hand of a UK company, these would seem to (potentially) apply.

You would need to divulge the EU state in which the director was resident for more information. Equally, it is possible to negate this by having a UK based director and ensuring that all board meetings and significant controlling actions are undertaken ONLY during visits to the UK. However, it depends upon the specifics of the EU state in which he is resident.

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By constantinesavva
08th Feb 2011 13:22

Tax in other country much lower than UK

Hi; the director is Cypriot resident and in that country the CT rate is much lower than the Uk (appx 12%). There is another director operating permanently from London, non-UK resident too.

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By frustratedwithhmrc
08th Feb 2011 13:36

Then you are in luck...

Cyprus does not appear to have Controlled Foreign Company rules, so he should be okay.

Not sure what you mean by "There is another director operating permanently from London, non-UK resident too." as he is either "operating permanently from London" or "non-UK resident". It is difficult to be both - do you mean that he is UK-non domiciled, but UK resident?

 

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By constantinesavva
08th Feb 2011 13:45

the other director mover here from another EU

 the other director has just mover over from Greece (another EU country) permanently.

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By frustratedwithhmrc
08th Feb 2011 15:31

Then I don't think you have a problem...

As long as the Cypriot registered director comes to the UK solely for the purpose of board meetings and those board meetings are only held in the UK then I don't think you have a problem as all expenses are "wholly and exclusively" in connection with the operation of the UK company.

Grey areas to avoid are:

1. Making board decisions when either or both of the directors are outside the UK (as this could be used by a UK tax inspector to weaken the argument about expenses).

2. Undertaking activities in the UK which aren't related to the UK company (e.g. having a board meeting and then spending the next week playing golf and classifying the entire period as a company expense). They might get away with it, but on the whole it is better that they know up-front rather than dealing with the issue afterwards.

3. It might be worthwhile amending the company charter (memorandum / articles of association) to state that any board meetings MUST be held in the UK and that directors attending a board meeting will be paid relevant expenses. However, this is really going overboard, I think you are covered with everything anyway.

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By jimcalverley
09th Feb 2011 12:44

Ordinary Commuting!

Sounds more like ordinary commuting to me, the UK office sounds like his permenant workplace. Just because home to work is cross border does not make it allowable.

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By frustratedwithhmrc
09th Feb 2011 14:05

Ordinary Commuting - I don't think so...

Since the Cypriot director is already running other (presumably associated businesses) in other parts of Europe, it is quite reasonable for him to argue that this is his primary workplace. This could either be a home office in Cyprus or another business premises there.

Worst case scenario is that if a HMRC Inspector tried to argue that this was ordinary commuting they would get laughed out of court (literally).

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