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Helicopter: training costs etc..

Our Director is now fully qualified helicopter pilot.

Hello everyone.

Hope you can help.

Our Director (IT company, service nationwide) has recently become a fully qualified helicopter pilot. He is using a hired helicopter for business travel only, but in order to qualify, he had to fly a certain amount of hrs, which were necessary and part of his training. 

The question is now how do I treat all his expenses paid for courses and all other necessary expenses? The whole process of learning and qualifying took him about 2 years. All invoices were issued to the company. We have processed them as "training" in P&L and never claimed VAT back. Were we right to claim these as business expenses? Can we claim VAT, can we claim it backdated? Any allowances for air travel allowed, i.e. may be air miles? 

Any suggestions will be much appreciated, or if you share some links where I can find the relevant information, please.

Thank you.

 

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16th Jan 2019 15:25

What does the business do that a helicopter is necessary for?

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to Duggimon
17th Jan 2019 07:35

Allows busy important director to travel between current & potential clients quicker hence commercial advantage given to the company?

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to atleastisoundknowledgable...
17th Jan 2019 08:31

Which just comes across as if justifying after the event.
OP:-
Is it a coincidence that the individual is a director?
Call me a cynic but the word hobby comes to mind.

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By Zinmar
to Wanderer
17th Jan 2019 09:56

Wanderer wrote:

Which just comes across as if justifying after the event.
OP:-
Is it a coincidence that the individual is a director?
Call me a cynic but the word hobby comes to mind.

Thank you for your opinion.

Well, the idea is that after the next level when qualified he will be able to take passengers (other engineers) too. And yes, even being a Director, he works!! And if there is an urgency, he will be there in no time. We are IT company with a very wide spectrum of services and for some of our clients, it is vital to have all systems and networks working.

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to Zinmar
17th Jan 2019 10:10

Zinmar wrote:

And if there is an urgency, he will be there in no time.

That's going to come in handy when he wants to clear his loan account.

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to Zinmar
17th Jan 2019 11:23

Zinmar wrote:

We are IT company with a very wide spectrum of services and for some of our clients, it is vital to have all systems and networks working.

Even with remote access, cloud systems, etc etc they still need to get an engineer to site by chopper? I suspect there are cheaper ways to acheive this, and if I we re a client I would be concerned if their contingency plan is dependent on weather, the director being available, etc

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17th Jan 2019 10:28

Good Moring Bull. This is Red Rag. Red Rag, this is Bull. Complete and utter Bull.

Closest case I can think of, which was use of asset, rather than work-related training, is Rockall, which is quite a fun read.

https://www.bailii.org/uk/cases/UKFTT/TC/2014/TC03767.html

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to Vile Nortin Naipaan
17th Jan 2019 11:34

Very interesting case.

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17th Jan 2019 15:54

If I was picking between two IT providers and all else was equal but one of them would arrive in a helicopter, I would, to be fair, pick the helicopter one.

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to Duggimon
18th Jan 2019 12:12

How lovely for you that price is inconsequential.

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to andy.partridge
18th Jan 2019 12:58

In my scenario, the do the same job and cost the same, that's what "all else being equal" meant to imply.

Presumably, in the real world, there would be quite different income levels needed in order to cover travel expenses.

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18th Jan 2019 11:23

I can not see how any of it would be allowable.
Once qualified he could possibly offer his services to the company after justifying how it is cheaper to hire a helicopter to say a chauffeur driven car, where the director could actually work/phone whilst being driven.
The director also has to get to and back from where ever the hire helicopter is situated
Sounds like a jolly for the director
Plus how many clients would have a helicopter pad handy thus meaning that you would still have to ferry the passengers/engineers tools etc via whatever means to the office.

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to meadowsaw227
18th Jan 2019 11:58

I don't think you're really getting on board this idea here. Clearly, once the director is fully qualified, the business will buy a helicopter and put a pad on the roof so the director and engineers can dramatically run across to it from the fire escape.

As for the other end, landing isn't necessary, they can use a rope ladder and swing right up to the door, then the director hovers above (thereby saving on parking, another big tick in the "valid business reasons" column), waiting for the return trip. Afterwards, the engineer just needs to get out in the open, grab the rope ladder and away they go.

I fail to see how there's any non-business use in there. They can even put a decals on the side of the chopper showing them swinging into action with a replacement keyboard while explosions go off behind them, shifting some of the costs to the advertising budget.

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to meadowsaw227
18th Jan 2019 11:53

"In 1972, a crack commando unit was sent to prison by a military court for a crime they didn't commit. These men promptly escaped from a maximum security stockade to the Los Angeles underground. Today, still wanted by the government they survive as IT engineers of fortune. If you have a problem, if no one else can help, and if you can find them....maybe you can hire The A-Team."

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18th Jan 2019 12:06

Here is my take. If it was a van or an HGV (and he did not have a drivers licence) would the answers be the same ie allowable. If so I would have no problem.

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By pmt1pff
18th Jan 2019 12:58

i thought IT in 'the cloud' was figurative, is it literal?? is that why he needs the helicopter?

generally speaking the company would be fine to claim a tax deduction for all these costs wouldnt it? companies pay for personal expenditure all the time - 'company' cars for instance. unless there are special rules for Directors which i am not aware of (always a risk!).

your real question may be more on the employment taxes side of things - has the company provided a benefit to the director when it paid for the helicopter training/flights. you may be able to justify the business travel element but personally i wouldn't be comfortable arguing against obtaining the licence being a benefit. if he quit tomorrow he would still have the licence, so hard to argue is not a personal benefit in my mind. remember tax charge would be based on vat inclusive amount (whether you recover or not). if you think it is a benefit, there is then a conversation to be had with finance/Board about whether this goes on a P11D or a PSA.

i am not sure on the VAT recovery point, woudlnt want to steer you wrong so will leave others to give you any bad news here! at least the invoices are in the company name, that is a good start.

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By peterk
18th Jan 2019 14:20

"Wholly and exclusively for the purposes of trade" - if I remember correctly?
If he had been learning to drive, instead of learning to fly, would he have claimed that expense through the company?
I'd like to be a fly on the wall at the HMRC interview.

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18th Jan 2019 14:29

Even if wholly ,exclusively & necessarily complied;the training costs would only be putting the employee in a position to perform ,not actual performance.

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18th Jan 2019 19:50

@ Zinmar (OP).

May I restrict my comments solely to your questions regarding VAT.

[1] You ask “Can we claim VAT”. In order to answer that question, one must appreciate one basic PRINCIPLE of VAT (in relation to supplies of goods/services): that principle is that it is the RECIPIENT of the goods/services who is entitled to any allowable Input Tax. Even if a person (whether individual, company, partnership or whatever) BENEFITS from the goods/services, that person is NOT entitled to claim the Input Tax unless they are also the RECIPIENT of the goods/services.

There have been several Tribunal cases which have (many in the field of professional services) drawn a clear distinction between the RECIPIENT of the SERVICES and the persons who derive BENEFIT therefrom.

You have indicated that “All invoices were issued to the company” – it certainly HELPS support the case, for claiming the Input Tax, that the invoices were addressed to the company (albeit the addressing of the invoice to the company is not conclusive) – however, since the invoices are so addressed, it appears highly likely that the “contracts for services” (whether written or oral – I would surmise the former) were between the COMPANY and the course providers (and also with the providers of services re the “necessary expenses” related to those courses). One would need to go through each expense item, to ascertain the identity of the RECIPIENT of each service, in order to establish for certain whether Input Tax is recoverable.

In relation to the COURSES themselves, it would appear highly likely that there were written contracts, in which case you should inspect those contracts in order to hopefully determine the identity of the recipient of the services. Without seeing those written contracts, I would provisionally be (say) 75%/80% certain that it was the company which received the services, in which case of course the Input Tax thereon is recoverable.

[2] Your supplementary question is “Can we claim it backdated?” The answer to this question is identical to the answer to question [1] above, of course, subject to the four years’ time limit for correction of errors.

Basil.

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