Explorer's Tax Return
We have a client who is an explorer. We're doing his first self-assessment tax return now for 2010/11.
Since October 2010 he has been doing after-dinner speaking and company presentations. The main focus is on his 2.5 year jungle expedition from February 08 to August 10.
Expedition costs were incurred throughout the 2.5 year period which was funded by a variety of means - personal & family money, private donations and corporate contributions. To what extent is any of this taxable? He was out of the UK for the whole tax years 08/09 and 09/10 so my main focus or concern is on 10/11. He believes his first trading income is from his 1st speaking engagement in October 2010 and that everything before that is not taxable. However, we intend to bring in significant amounts of cost as "pre-trading expenditure" as had he not incurred these costs he would not be in a position to trade as a celebrity/motivational speaker.
The best case scenario, and our aim, is to exclude all pre-trading income (if there is such a term) but to include all pre-trading expenditure and obviously all income from speaking engagements since returning to the UK.
Thoughts anyone?
The costs of training prior
to self-employment is not normally tax allowable and this seems a similar scenario which would certainly be challenged by HMRC. Now if the start of business was the day he started expenditure making arrangements for after dinner speaches etc. then that might be allowable.
Commercial intent......
....was always there I'm told. This is supported by the style of video footage taken and the written record of events which subsequently formed the basis for a book covering the experience. The contributions received were mainly donations rather than being consideration for anything in return and the vast majority were received in two tax years where he didn't put a single foot in the UK for the entire year.
He did incur the costs, which were revenue in nature, and if incurred now would be considered as trading expenditure I'm sure. The timeframe is within the last 7 years and for all these reasons I believe they are captured by ITTOIA s57 and can be treated as expenses of the first trading period being 2010/11.
Rather than having your cake and eating it, I prefer to think of this as achieving the best outcome for our client by minimising his tax bill by fair means rather than foul. But I do take your point Old Grey One and thank you for your observations.
The tax and/or accounting aspects were not high on his list of priorities before or during this expedition but he certainly was minded to make some money from his endeavours. He intended to trade on his return to the UK and whilst I'm aware of legislation covering pre-trading expenditure I'm not aware of any requirement to factor in donated income received pre-trading and whilst outside of the UK.
Any further comments gladly received...
I prefer ...
... legal means to fair means.
Whilst reducing tax legally is the accountants aim, sometimes the methods stick in ones craw, and there is a grey line easily crossed as the MP's so ably demonstrated with their expenses.
Personally I think obtaining tax relief for an expense that someone has re-imbursed you for is morally reprehensible, but that is probably why I'll never be rich (but at least I'll be well rested).
I do get rather saddened by how cynical and grasping the world is these days. There is more than enough to go round if we could all just play nicely!
Aha OGA
if only we were all perfect. The problem today is that we have a society where it is easy for the rich to get richer but the poor stay poorer. At least under Maggie the poor had some sort of chance.
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I don't see how ... 1 thanks
... you can claim an expense for something that has effectively been paid for by a third party!
Without getting into the validity of what you want to do, surely the deduction would be the net expense after contributions from benefactors.
I think you need to look at the chicken an egg scenario too, did he do the expedition for personal motives and then found he could make money talking about it, or did he mount the expedition for the purpose of having something to talk about?
My gut feel is the first instance, or this would have been sorted out up front, and may be even channelled through a company or similar.
The phrase having your cake and eating it comes to mind!