Hey everyone,
Thanks a lot for taking the time to read this.
The situation involves my client (a ltd company director of an IT consultancy business) potentially completing some contract work falling inside IR35. As such, the workplace he'll be travelling to will be classed as permanent, thus rendering all travel and subsistence costs (including overnight accommodation) non-business in nature. It's a largely theoretical problem as my client will most probably simply pay these expenses from private funds, but I was curious as to the possible tax treatments available if they were paid for with the company credit card instead. I know it's a bit pedantic but it'll just keep bugging me otherwise.
I believe these are the most obvious options:
1) Treat the expenses as additional director's remuneration. Allowable for corporation tax purposes and taxable via PAYE (being subject to usual IT and Ee and Er NIC). No VAT reclaimable.
2) Treat the expenses as debits to the Director's Loan Account. No effect on CT or PAYE (and no BiK or s455 tax assuming DLA balance is minimal and cleared before the end of the accounting period). No VAT reclaimable.
3) Treat the expenses as benefits in kind reimbursements. Would this be allowable for CT? Would the company be able to reclaim input VAT on it (I'm assuming not)? As the company would be paying for it directly but the director would arrange it himself, I take it it would need to be processed through payroll via PAYE (as 'Other Earnings') but with only Class 1 NIC deducted and no IT. Is this correct (for both private travel and private subsistence costs)? And it would need to be included on a P11D but no Class 1A NIC would be deducted, right?
I'd really appreciate some clarification as otherwise I'll be going crazy thinking about it. It's really only that third scenario I'm not sure about.
Again, thanks for your help and time!
Replies (14)
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Are you "the client" by any chance?
In your first posting last year you described yourself as "the sole director of a UK-based VAT-registered limited company". Doesn't mean you aren't an accountant in practice but I've got a shiny Brexit 50p here says you aren't.
If this were my client and their engager was not paying for accommodation then I would argue that this contract is outside IR35.
An accountant in practice eh? Hope your clients appreciate that you are practising on them!
Anyone who thinks they know it all and don't need to keep learning/looking stuff up may have forgotten that the rules keep changing. Were someone to engage in constructive discussion with the OP, we might actually get a thread reminiscent of Any Answers heyday. Would that be such a bad thing?
I’ve been away from AW for a while and have been reading some responses. The attitude of certain individuals is quite shocking. Perhaps it’s the time of year....
Yep Tim, they're ecstatic.
Can I assume from your lack of answer that you'll also find it useful to see people's opinions on this? Apologies if I've misinterpreted it.
Burn Tim, burn.