Agents expenses

Agents expenses

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To what extent can the expenses of a self employed agent be considered expenses of their principal?

My corporate client uses a number of self employed sales agents. We are not concerned about their employment status but I am pondering how we should be recording and claiming their expenses. The client pays some incidental costs for visiting more distant clients and attending sales promotions (e.g. hotel bills) but the agents remain responsible for their motor expenses, telephones etc. Most of these incidental costs are charged to the company debit card, some are reimbursed through petty cash and at present all such costs are allocated to expense headings in the company accounts.

There will be no P11D returns because they are self-employed. Thinking about this I am now wondering whether the we should be showing these costs as part of the payments to the agents rather than as the company's own incidental costs. If we did so we would advise the agents to include them as income in their SA returns and counter-claim the expenses themselves. I'm perplexed because these are obviously legitimate costs and most of them are being paid directly by the company but they are not staff expenses and we seem rather conveniently to be escaping the straightjacket of P11D returns. I'm sure this is a fairly common occurrence so was wondering what others are doing and whether anyone has any experience of the Revenue's approach to this?

Taking the matter a stage further what are the VAT implications? Is the company entitled to the claim the input tax on these costs? If it is deductible, surely the next step is to suggest that more of the agents costs might be paid by the Company whereupon the agents could benefit from registering and joining the flat rate scheme. Now somehow that seems too easy!

Gareth Thomas

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