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Directors expenses but no salary?

Directors expenses but no salary?

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Because said director has another well-paid job, he does not take a salary from the company where he is a director and shareholder. He does, however, travel to trade fairs and clients to represent his company.

His company has not yet reimbursed him for the business mileage that he has incurred during 05/06 and he would like to show it as an expense on his SA return.

It would appear that he is not able to do this because he has not received any income from this employment and therefore cannot make a 'loss' on this employment.

Is there a way around this, or will the company have to reimburse him for the expenses inorder for him to benefit?

Thanks is advance for your assistance.
Rob Cole

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By Chaztax
30th Jan 2007 17:52

MAR seems to be different
That may be the rule for "normal" travel expenses - however, my point was that, when I looked at the legislation, I noticed that mileage allowance relief was treated slightly differently.

See also s.359 ITEPA 2003.

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By frauke
30th Jan 2007 13:23

EIM31658
I found this:

EIM31658 - The general rule for employees’ expenses: deductions not to exceed earnings:

http://www.hmrc.gov.uk/manuals/eimanual/EIM31658.htm

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By Rob Cole
29th Jan 2007 10:44

Car
Thank you for your comments.

It is his own car.

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By Chaztax
29th Jan 2007 11:15

The legislation
If it is his own car then the question is whether the director can claim Mileage Allowance Relief (i.e. the AMAPs not reimbursed). The potential problem is that he has no earnings from that employment. s.329 and s.328 ITEPA 2003 state the general rules for expenses, which are basically (1) that the amount of a deduction cannot exceed the earnings from which they are deductible (i.e. they cannot create an “employment loss”) and (2) deductions from one employment cannot be offset against earnings from another employment.

However, these sections apply to Part 5 of ITEPA and MAR is governed by s.231 and s.232, which fall within Part 4 of ITEPA. MAR is therefore dealt with slightly differently from other travel expenses.

There doesn’t seem to be anything in s. 232, or the surrounding sections, which states that MAR has to be specific to any one employment – indeed it says “if ANY of the employee’s earnings are taxable earnings in the tax year in which the employee receives them ….the relief is allowed as a deduction from those earnings.”

Surprising, perhaps, but that’s what the legislation says.

Unless anyone can see a flaw in this analysis, it would seem possible to offset MAR from the “salary – less” employment against the earnings from the other, salaried, employment.

Obviously it is possible that HMRC might initially query it, and you also have to get your tax return software to co – operate!

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By Paula Sparrow
26th Jan 2007 19:47

He needs to be reimbursed by the company
to get any tax relief on the expenses incurred personally.

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By deanshepherd
26th Jan 2007 22:34

Are you sure?

Surely if, as an employee, he is reimbursed at 0p per mile then he can claim relief for the difference between that and the AMAP rates of 40/25p on his tax return whether he receives any remuneration or not.

Not a situation I have come across before.

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By AnonymousUser
28th Jan 2007 23:32

Dean
You are quite correct in that the employee is entitled to claim mileage. However, such relief is given as a deduction against employment earnings - if he has no such earnings, no relief!

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By Chaztax
29th Jan 2007 10:22

Private or company car?
Does the director own the car in which he does this travelling personally, or is it a company car?

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