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Subsistence - What is reasonable?

What is reasonable for a touring musician

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Hi all

Wondering if any of you have had experience of dealing with HMRC in realtion to subsistence costs. Many of my clients are musicians and fly in and out of a city at the weekend so subsistence costs are allowable. The only guidance from HMRC is that these costs should be reaosnable but what is reasobale to me might be very different to what is reasonable to someone else. Alot of these poeple have become used to the finer things in life so can spend a substantial amount in a restaurant when they are on the road.

Also, if they are sole director/shareholders of their own company are the rules slightly different? Do they fall under the employee rules here or does HMRC see through that and treat them as self employed?

Appreciate any help here

M

Replies (25)

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By David Ex
23rd Feb 2022 11:45

Mattax wrote:

Do they fall under the employee rules here or does HMRC see through that and treat them as self employed?

They aren’t self-employed so won’t be treated as such. You should start by reading HNRC’s “Expenses and benefits for directors and employees - a tax guide: 480” and “ Tax and National Insurance contributions for employee travel: 490”

https://www.gov.uk/government/collections/expenses-and-benefits-for-dire...

https://www.gov.uk/government/collections/tax-and-national-insurance-con...

Mattax wrote:

Many of my clients are musicians and fly in and out of a city at the weekend so subsistence costs are allowable. The only guidance from HMRC is that these costs should be reaosnable but what is reasobale to me might be very different to what is reasonable to someone else. Alot of these poeple have become used to the finer things in life so can spend a substantial amount in a restaurant when they are on the road.

This is HMRC’s take on potentially “excessive” subsistence:

EIM31835 - Travel expenses: general: scale of expenditure

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim31835

I’ve never seen the point taken but might be sensible to warn the client of the risk.

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Replying to David Ex:
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By Mattax
23rd Feb 2022 12:24

"However, you should not refuse a deduction for the actually incurred cost of a journey, hotel room or meal simply because a less expensive alternative is available."

Thats the key line here IMO. Many thanks David

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Replying to David Ex:
Universe
By SteveOH
24th Feb 2022 09:58

On your last point about scale of expenditure, I suppose the thinking would be that a first class ticket from London to Venice would be allowable, even though a cheaper alternative was available, but a trip on the Orient Express would not.

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By 356B
23rd Feb 2022 12:29

Some years ago I acted for an entertainer who operated through a LTD, and I agreed with the Inspector that all subsistence expenses would be allowable for the company and no benefit accrued to the director. Whether such a "concession" is still available can only be determined by a discussion with HMRC. Always worth a go.

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Replying to 356B:
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By David Ex
23rd Feb 2022 12:39

356B wrote:

Some years ago I acted for an entertainer who operated through a LTD, and I agreed with the Inspector that all subsistence expenses would be allowable for the company and no benefit accrued to the director. Whether such a "concession" is still available can only be determined by a discussion with HMRC. Always worth a go.

I suspect no such “open ended” commitment would be made now. Nor should it, to be fair.

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Replying to 356B:
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By Mattax
23rd Feb 2022 12:39

Thats good to know 356B thank you. Was this as a result of an inspection or did you agree this with HMRC as a precaution?

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Replying to Mattax:
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By 356B
23rd Feb 2022 16:05

Negotiations when submitting first year's accounts.

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By jwill76
23rd Feb 2022 13:52

I agree. Whats reasonable for let's say a stadium level band vs a sub 300 cap club band is two different things really. Same with accommodation.
I'm sure majority of HMRC inspectors wouldn't understand the industry. Keen to see the views posted

Get the band to up their rider with the venues? :D

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By gillybean04
23rd Feb 2022 14:30

What exactly do you mean when you say many of your clients fly in and out of A city (singular) at the weekend?

Jetsetting around the world/UK to different gigs every week/month is quite different to someone who say lives in Glasgow but travels to London every weekend because that is where their employment/trade is based (https://www.accountingweb.co.uk/tax/hmrc-policy/contractors-home-to-hote...)

If you're looking for pointers on a specific case, you need to give specific details. There should be no "if" they are director/shareholder.ither they are or they aren't. Each case needs to be assessed on it's own merits.

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Replying to gillybean04:
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By Mattax
23rd Feb 2022 14:34

Mostly DJs so they are playing different cities every weekend all over the world.
Some have LTD set ups and some are sole traders

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Replying to Mattax:
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By gillybean04
23rd Feb 2022 20:48

Thanks. It was a small doubt, but I like double checking.

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Replying to Mattax:
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By jwill76
01st Mar 2022 16:16

Mattax wrote:

Mostly DJs so they are playing different cities every weekend all over the world.
Some have LTD set ups and some are sole traders


Ah they are DJ's, not musicians then. I see why the claim may be confusing now ;)
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By I'msorryIhaven'taclue
23rd Feb 2022 15:35

What's wrong with a few rolls and some quavers!

I had a client who used to regularly travel to London for meetings and whilst there eat lunch at mega-costly Gordon Ramsay's. It was a few years ago, and was never queried by HMRC; but the supporting contention was that it was not only up to him whether he chose to eat cheaply or expensively but also that Ramsay's was commensurate with his lifestyle.

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Replying to I'msorryIhaven'taclue:
A Putey FACA
By Arthur Putey
23rd Feb 2022 16:20

Wonder what Meat Loaf claimed for?

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By Tax Dragon
24th Feb 2022 07:12

For sole traders, it's BIM. Probably start at 47705 but follow the link once you get to the bottom of that page.

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Replying to Tax Dragon:
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By I'msorryIhaven'taclue
24th Feb 2022 07:54

Never mind that... WW3 just kicked off!

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Replying to I'msorryIhaven'taclue:
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By Hugo Fair
24th Feb 2022 22:07

UK RAISES ALERT LEVEL
The English are feeling the pinch in relation to recent Russian threats and have therefore raised their security level from “Miffed” to “Peeved.”
Soon though, security levels may be raised yet again to “Irritated” or even “A Bit Cross.”
The English have not been “A Bit Cross” since the blitz in 1940 when tea supplies nearly ran out.
The Russians have been re-categorised from “Tiresome” to “A Bloody Nuisance.”
The last time the British issued a “Bloody Nuisance” warning level was in 1588, when threatened by the Spanish Armada.

The Scots have raised their threat level from “Pi55ed Off” to “Let’s Get the Bastards.”
They don’t have any other levels.
This is the reason they have been used on the front line of the British army for the last 300 years.

... there are lots of other variants, but Aweb's software keeps throwing a wobbly!

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Replying to Hugo Fair:
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By gillybean04
27th Feb 2022 10:40

The words of John Cleese I believe.

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Replying to gillybean04:
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By Hugo Fair
27th Feb 2022 22:08

Reputedly so ... although I gather that he denies authorship!

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7om
By Tom 7000
25th Feb 2022 11:20

And... thats why they ask you on your PII policy if you have any entertainers....... as they think everything is tax deductible and dont care....

and up goes your premiums

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By Rgab1947
25th Feb 2022 17:26

It's not up to HMRC to say what is unreasonabke. E.g the Beatles would not stay in 2* hotels but an HMRC employee would (I trust).

Its what the law states is deductible.

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Replying to Rgab1947:
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By Tax Dragon
27th Feb 2022 07:42

That's great. And the relevant law (s57A ITTOIA in the case of sole traders) provides Conditions A and B. It's nice and clear that if you don't meet (either of) those conditions, you are not entitled to a tax deduction. Unfortunately, it's also clear that meeting the conditions is not enough to demonstrate deductibility. In the preamble to the conditions, the section uses the word "reasonable". This gives scope for opinion and case law to arise. What you think is reasonable might be different from what I think. It might be different from what Paul McCartney thinks. It might be different from what HMRC thinks.

To provide some consistency (/fairness), it's entirely right and proper that HMRC publishes its view. Where that view is more 'generous' than what the taxpayer thinks, the taxpayer is entirely entitled to follow either their own view or the published view of HMRC. Either way, they can be confident the expense they deduct will be allowed in full. Where HMRC's view is the less 'generous', and the expense deducted exceeds that which HMRC has said it would allow, what may ensue depends in part on what the taxpayer discloses in the white space. That's a topic beyond this thread.

In short... I agree, with you, but you have sold yourself short in your explanation.

Edit: the reasonableness test is for the subsistence (as the OP rightly stated in the heading). I've realised you're talking about the hotel itself. That's just the standard W&E test (still talking about sole trader). 2* or 5* doesn't matter - if the cost is W&E, it's deductible.

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Replying to Tax Dragon:
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By Tax Dragon
28th Feb 2022 06:29

Edit 2 (thanks to John Cleese, allegedly... wouldn't have reread the thread without him, anyway): replace the parenthisised "either of" with "both of". Maybe, anyway - I've confused myself with by stating the rule in the negative.

Both conditions must be met. So if you don't meet either of them, deduction isn't permitted. But by saying "if you don't meet (either of) those conditions, you are not entitled to a tax deduction", I've made it sound (on a reread) as if, if you do meet either, you are permitted a deduction (subject to the expense itself being reasonable... if it's not, no deduction for the expense is permitted).

So... stated in the positive, it's clear: you must meet both. Stated in the negative, it should be clear: you must not fail either. But stated the way I stated it in the above comment... there's ambiguity. To me anyway. This morning. (Might be different again later.)

Language. It's bloody difficult.

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paddle steamer
By DJKL
01st Mar 2022 17:37

Well if Keith Moon, deduction for the hotel TV meeting the swimming pool seems reasonable. (Not sure about deductibility re the Roller)

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Replying to DJKL:
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By Hugo Fair
01st Mar 2022 19:08

Someone I knew in the early 70s (who worked on a movie that included Frank Zappa and Keith Moon believe it or not) told me a supposedly true confrontation between Moonie and the Hotel Manager:
HM: "Keep the noise down in there, other guests are complaining".
The Loon: "Shriek" (accompanied by throwing a bottle of Jack Daniels at HM).
HM (after ducking): "Look at the damage to the bedroom wall, you f**kwit!".
Keith (after taking a framed picture from the wall and smashing out the picture + glass, then hanging the frame around the half-bottle protruding from the wall): "Get me a pen will you?"
HM (incredulous but professional) does so without a word.
Moonie (after signing his name on the wall next to the dripping bottle): "There - that's an original Keith Moon work of art - worth more than whatever your problem is - now pi55 off!"

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