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deductibility of travel expenses ...

... if that's your job?

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I have a client (UK tax resi) who works as a consultant from his ltd for a number of clients. All his work can be done remotely. He has decided that he wants to do some travelling and docuement it for a YouTube channel - think Kara & Nate (don't worry - I didn't know who they were either).

He's going to try it for 6 months to see whether the life is for him or not, but the intention is to earn enough from his YouTube channel and endorsements etc to keep 'on the road' for a long time. (Kare & Nate have been doing it for I think 3 years and make net profits of $60k-$100k/qtr!). In the meantime, he'll be continuing some of his consultancy work for cashflow, until the travel 'work' brings in enough cash to live off.

Once he's doing it 'properly', there'll be the usual non-resi rules. My question is, whilst he is tax resi, are his travel expenses (flights, accomodation, subsistence, activity spen) are deductible? His plan is to spend a week in each location, documenting (most) things everyday to put it all (well, post edit) up his YT & website.

Thanks,

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By Mr_awol
12th Jun 2020 12:39

I'd imagine a journalist/travel writer, being sent out to places whether they want to go or not, would be able to get tax relief against these expenses.

I suppose it depends in part whether your client is going out to document various locations, or going on a jolly and recording some of their experiences in the hope of clawing back some/all of the cost. Is there a realistic expectation of profit?

How is your client going to relieve the expenses? Presumably he doesn't plan to put it all through his existing consultancy company against that income. Will he have a separate corporate vehicle for this 'venture', run it as a sole trade, etc?

If a Sole Trade with no desire to offset the losses sideways, then you might be ok with a lot of it.

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Replying to Mr_awol:
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By atleastisoundknowledgable...
12th Jun 2020 14:58

Thanks.
The intention is that this is a real business - the example I gave of Kara&Nate shows that it can be very successful (they're basically on holiday 365 days a year and still earn far more than I do!).
They won't be relieved against the current company - newco or partnership (with girlfriend). Prob partnership.

Why do you say "no desire to offset the losses sideways"? In an attempt NOT to muddy the water?

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By Mr_awol
12th Jun 2020 15:44

I'm just mulling it over, and haven't actually come to a decision (partly because there's a lot of variables that you probably wouldn't want to go into anyway) but it depends on how convinced of the commerciality you are I suppose.

You could go through it with them, see what the reality of the plan is, and then make a sideways claim if you think it's on the level. HMRC probably wont ever look at it, or care, and life will go on. If HMRC do look at it, then I suspect this wont be an easy one to defend.

Alternatively if they are low salary/high dividend AND there is a good chance of future income from the enterprise then you may well get a greater value for the relief by deferring it against BR/HR tax plus C4 NIC, rather than just dividend tax. Plus you get the added benefit if HMRC ever look at it of being able to point at the income as proof that it's a 'business'.

You might still struggle with some expenses, particularly if they stay in one place for a long time and/or the income isn't relevant to (or derived from) their online content so much as they personalities. Then you may be into media rights which I know nothing about.

I took a very quick look at the Kara and Nate website. I'm not convinced how much of their income comes directly from the 'journalistic' nature of their vlog and how much is simple affiliate marketing, donations, and sales of their e-book 'training courses'. My gut feel is that if I were acting for them then id struggle to offset too much of their travel or accommodation costs against their website income. They appear to me to be using their personal/private travel knowledge to flog the dream of cheap luxury travel as a thinly veiled way of promoting credit card and other loyalty products for commission. It's like a sole trade version of The Points Guy in that respect (there may be much more to it, who knows).

Edit: Actually I've just seen they actual publish their (claimed) revenue streams from each source. I've only looked at the latest one which shows substantial YouTube revenue but also shows this as a dramatic increase from previous quarter. Previously, it looks like the affiliate marketing was the main income source, which is what I would have expected. This does muddy the waters greatly -good luck with working this one out.

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By atleastisoundknowledgable...
12th Jun 2020 15:59

Thanks ... I think ...

Seriously, you time & effort is really appreciated. :)

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By Tax Dragon
12th Jun 2020 16:14

atleastisoundknowledgable... wrote:

Why do you say "no desire to offset the losses sideways"? In an attempt NOT to muddy the water?

No, because there are extra tests - e.g. s66 ITA 2007 - which may well not be met (especially with a six month suck it and see approach).

Mr_awol has provided some sage words, in my view. Draw up accounts, include the expenses, make an assessment retrospectively about how commercial the undertaking really was (you likely won't know in advance) - if there's a profit, bingo. Big if, that, though. Helluva big if.

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By spilly
12th Jun 2020 22:18

My understanding is that the idea is to get enough of a following on social media etc so most of the travel expenses are ‘comped’ by the hotel/resort in return for being promoted in a positive manner.
So the initial expenses could be high, but this would reduce as their profile builds.
I’m wondering if I could do this for a ‘wine bars of the UK’ media channel for the post-Covid future?

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