Can HMRC be right to reject claim for business expenses??

Can HMRC be right to reject claim for business...

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I am assisting someone who is under HMRC enquiry for 2003-04 and am disturbed at the reasons for HMRCs rejection of his expenses claims. HMRC are rejecting his expenses claims because the expenditure, in their words, was an employer cost. I always believed that an expenses deduction was allowable if it was an employer/business related claim??

The background is that the employee initially incurred expenses for his company via his personal credit card due to cash flow problems the company had. The company then went into liquidation and the expenses were never reimbursed to him. The employee made a claim in the employment section of the tax return. The expenses amount to £22k and relate to :

Flights overseas to meet potential investors, attend trade fair for the company,taxi
Flights for CEO and other staff paid for on his credit card
postage, bank transfer charges for the company paid by him
Notary expenses for German company secretary
Purchase of company laptop for an employee in Germany
Investor lunch
Hotel bills for a potential investor

HMRC have rejected these claims for the following reasons:

business flights, hotels, accommodation, notary - this is an employer cost/expenditure and is not allowable under s336 ITEPA 03
Laptop - not allowable as can be used for private use and purchased for foreign employee therefore gift/employer cost!
investor lunch - this is subsistence and not eligible for tax relief

I would be very grateful if someone could enlighten me as to how HMRC can reject a deduction for expenses which they have acknowledged were employer related expenditure incurred by him, and how a purchase of a laptop for an overseas employee could be taxable as it could be used for personal purposes and regarded as a gift??

Many thanks
Simran

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