My husband has a small building business and travels around the area quite a bit. His accountant says that subsistance is never allowable, but someone else told me that if you were away from home a certain distance and for a certain time, then it is allowable.
Who is right?
Also, he uses quite a lot of tools eg wheelbarrows, hammers etc.
What are the rules for capitalising these items. Should capital allowances be claimed against them, and is there a limit eg under £100 that the items should be just put in the p&l account.
And finally, what are the rates of capital allowances for tools and also computer equipment etc.
I want to know the rules before we go to see the accountant, just so that I am on the ball a bit more
Thank you
Les Davies
Replies (4)
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Subsistance
In most cases the accountant here is correct; there is a duality of purpose as your husband eats to live and not wholly for the purpose of the business. For an overnight stay however ITEPA 2003, s241 applies. This means that any payments/reimbursements are exempt from tax and NI on personal expenses up to a VAT inclusive amount of £5 a night (£10 if outside the UK).
See the Inland Revenue manual BIM47705 for clarification here:
http://www.hmrc.gov.uk/manuals/bimmanual/BIM47705.htm
Subsistence only when travelling
It all a bit subjective but:
When my wife gets the 6am train to London and the 8pm back her company pays for a coffee on the train down, lunch and a sandwich on the way back (all receipted of course). When she is in and around Manchester she only gets her lunch if she buy one for a client and then it is entertaining.
Note: Must remeber to appy for a dispensation.
expenses
What about overnight travel expenditure and temporary place of work rules? I think £5.00 if in UK is allowable.
builders
I would not normally claim capital allowances on small tools but write them off as and when purchased in yhe trading account. These day £200 would probably be the minimum worth capitalising as a separate item.
For equipment purchased after 5 April 2008 there are new rules. In most cases even though they are classed as assets in the accounts the first £50000 spent on plaqnt and equipment can be written off for tax in full if there is sufficient income.
The capital allowance rates for earlier years can be seen on HMRC website. It is permissible for computers to be written off for tax over 3 tax years.
Although your account is technically correct about subsistence the allowability may depend on whether the cost is greater than normal in some instances
Sorry if this reply is more complicated than you may have expected.