Compensation by Ltd co for personal airmiles use

How should the Ltd company compensate a director for use of personal airline miles for business trip

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Scenario:

A director of Ltd company will use his/her personal airline miles for a business trip. What are the rules around the Ltd company compensating/reimbursing the director for this outlay?

Replies (13)

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By carnmores
20th Mar 2023 10:14

air miles are given to the traveller not the ltd company when they pay so how did the traveller get these air miles, from business trips?

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Replying to carnmores:
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By nrw2
20th Mar 2023 10:23

Even if they were acquired from company spend, under most circumstances this is not taxable:

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim21618

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Replying to nrw2:
By Ruddles
20th Mar 2023 10:35

I think the point that was being made is that if the air miles have been generated from business trips for the employer then it would be inappropriate to expect reimbursement for use of the air miles on subsequent trips .

My own analysis, though - and I have no idea if it is correct or not - is that the air miles are personal to the individual (regardless of how obtained, and not having been taxed per the link above) and the individual is then free to use them on whatever flights they want. I don't see any reason therefore why the employee should not be reimbursed. As to the amount, it seems to me that the most convenient approach is simply to work out the amount of the fare reduction, eg if the cash payment is reduced by £160 then that should be the amount of the reimbursement.

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Replying to Ruddles:
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By carnmores
20th Mar 2023 10:51

precisely that . Nick

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By mrt23
20th Mar 2023 10:30

Specifically, the air miles in this case have been accumulated from personal credit card spend (ie points on cards transferred to an airline program).

Can the Ltd buy these miles from the director and if so what value basis can be used when the Ltd reimburses the director?

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Replying to mrt23:
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By carnmores
20th Mar 2023 10:56

basically, they aint transferrable, make of that what you will. in practice I would hope that it would be sensible to be able to get some recompensation. i have started thinking about pepper v hart without any clear reason why apart from its monday

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By petercooperuk
20th Mar 2023 11:35

There may be a moral case for reimbursing them, but for tax purposes I believe air miles have zero/negligible value. Consider that air miles incidentally received by an employee through business travel attract no BIK either.

The company and director are free to negotiate a value for the airmiles and have the equivalent extra salary paid, of course, but I'd be surprised if they could be treated as a typical expense.

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Replying to petercooperuk:
By Ruddles
20th Mar 2023 11:55

The Air Miles themselves have little intrinsic value. However, let's say I were to undertake a business flight, paying for it myself but to be reimbursed by my employer.

I could choose to pay, say, £350 in cash or £150 in cash with the balance in Air Miles. A problem with Air Miles is that they don't have a fixed value and the benefit of using them will depend on the flight (generally, they are more efficient if used for domestic flights). However, on the assumption that I could have used the same Air Miles on a personal trip I would argue that I had in fact spent the full £350 on the trip. The counter to that of course is that this would be a matter of personal choice. In actual fact I have only spent £150 on the flight. The fact that another flight may then cost me £200 more in cash than it would otherwise have done is neither here nor there. (And of course if that is the correct analysis then I would be far better spending the £350 in cash on the business flight and have it reimbursed by my employer, preserving the Air Miles for my own benefit.)

Let's say that I have won a free flight in my box of Cornflakes, and decide to use the voucher for a business trip. How much can I claim from my employer (more accurately how much can I claim as a deductible expense)? I suspect that I would have a hard time convincing HMRC that I had incurred any expense at all - the argument that the expense was the opportunity cost of not using the voucher for a personal trip getting little attention.

So I'm coning round to the viewpoint of the preceding post and thinking that the 'value' of the Air Miles would not in fact be an allowable expense. I would still think it appropriate to claim full reimbursement from my employer, but with tax relief only on the amount actually spent.

This is all from the top/back of my head without any reference whatsoever to relevant legislation and case law.

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Replying to Ruddles:
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By David Ex
20th Mar 2023 12:44

Ruddles wrote:

So I'm coning round to the viewpoint of the preceding post and thinking that the 'value' of the Air Miles would not in fact be an allowable expense. I would still think it appropriate to claim full reimbursement from my employer, but with tax relief only on the amount actually spent.

Think I started at that point - employee has incurred no expenditure for the employer to reimburse. But then an employer could (I would have thought) acquire an asset from an employee at market value with no adverse tax consequences (I think). Actually quite an interesting question.

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Replying to David Ex:
By Ruddles
20th Mar 2023 12:58

Problem is that, as noted above, 'Air Miles' have little or no intrinsic value and cannot be transferred (at least that is the case with BA's Avios - I don't know about other carriers).

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Replying to Ruddles:
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By mrt23
20th Mar 2023 13:52

Perhaps a starting point to value fair reimbursement from Ltd to director would be the cost the airline who issued the miles puts on purchasing them cash.

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Replying to mrt23:
By Ruddles
20th Mar 2023 14:01

As I mentioned above, that should be straightforward - the full cash cost of the fare less the cash actually paid. When I book with BA, I get a message along the lines of "use x Avios and save £y on the amount payable".

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Replying to mrt23:
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By metaphase
18th Jun 2024 23:13

That was the approach I was thinking too. It is often (esp for last minute long-haul business flights or complex itineraries) cheaper to purchase the miles and then make a redemption rather than pay cash for the ticket. It would seem reasonable for the company to then reimburse them for that miles purchase as it would still save money compared to paying cash?

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