Any Answers Answered: Travel expenses and AIA

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This month TAXtv hosts Tim Good and Giles Mooney answer questions about annual investment allowance and travel expenses for a director who lives outside London.

To watch the full video of Good and Mooney answering readers’ questions, click here or scroll down to the bottom of the page.

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AIA on a van sold to a client's new company

The first question to pique the interest of Good and Mooney was from AccountingWEB member Lottie1, who asked:

“The client bought a van for £14,000 three years ago and his accountant at the time claimed the whole lot as AIA, and he received a tax refund for that year 2014/15.

“I took him on for 2015/16 and put his depreciation through his accounts, obviously the van was not included on the tax return.

“The client has since set up a limited company and as such ceased trading as self-employed at 31.12.16. He wanted to transfer his van to the limited company at a cost of £9,000.

“So for his tax return 2016/17 as self-employed, should the £9,000 go back in as a balancing charge as he already had the tax benefit? This is going to give him a big tax bill especially as he was only self-employed for nine months, but clearly if this is the right treatment than it is what it is.”

For Tim Good, the default position is the actual price that’s used by the businesses will be the effective price for capital allowances in both of them.

“But,” said Good, “where you’ve got a transfer to a connected person under section 266 of the Capital Allowances Act 2001, you’re able to elect that the amount that’s used in the capital allowances computation for each party is an amount that gives rise to neither balancing charge nor balancing allowance.

“What we would do in this particular case is suggest that an election is made to transfer the van at its tax-written-down value of zero so there’s no balancing allowance on the sole trader, but of course that would mean the company isn’t going to be eligible for any capital allowances either.

“It would also mean that on an eventual disposal by the company, the then proceeds would come into charge to corporation tax in full. Of course, that would be advantageous in most cases - with corporate tax rates being lower than income tax rates that would defer any liability.”

Good also raised a final point about a time limit for making that election: for more details check the video below.

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Travel expenses for a director who lives outside London

The second and final question is from a reader whose username falls foul of the AccountingWEB profanity filter but appears to be a distant relation to French author and playwright Alexandre Dumas. He or she asks:

“A company with two directors: one lives in London and the other, Mr A lives outside London.

“Mr A commutes to London four days a week: three days to be with clients and not in the office at all, and one day to the office for a meeting.

“Can Mr A: 

  1. Claim his travel to London when he sees the clients?
  2. Claim his travel to London office to meet staff?
  3. Be considered a remote worker as he is only in the office once a week?”

To begin his answer, Good pointed to a number of relevant points posted on the Any Answers thread. In particular, a post from AccountingWEB regular I'msorryIhaven'taclue who includes extracts from the Revenue guidance.

According to Good, it’s “all to do with the temporary workplace rules, and although home-to-work travel is not allowable for an employee or for anyone else, if you’re travelling to a temporary workplace then in certain circumstances you can get relief. A temporary workplace is somewhere that is not your permanent workplace.”

Even those splitting their time between two offices in different locations would not be allowed to claim relief because each of them would be counted as a permanent workplace.

“Here,” Good continued, “we’re looking at travelling to clients rather than permanent workplaces. It sounds as though the clients’ offices are temporary workplaces, but I’m afraid that isn’t going to help us because the Revenue will not allow the relief where the journey to the temporary workplace is (by and large) the same as the journey to your permanent workplace.”

Examples are provided in the Any Answers thread, and in the video Good flagged up one particular case where the worker was entitled to relief. 

Full video

For the latest episode of TAXtv visit PTP Interactive. TAXtv is a monthly tax update programme available as an annual subscription from £199, (11 issues plus special editions) to view online, download from the internet or watch on DVD.

About Tom Herbert

Tom is acting editor at AccountingWEB, responsible for all editorial content on the site. If you have any comments or suggestions for us get in touch.

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13th Nov 2017 10:13

Is it just me (and Firefox) but the links are not working?

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to Tomazaan
13th Nov 2017 10:30

Thanks for flagging this - can you see the video now?

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to TomHerbert
13th Nov 2017 11:51

Yes. Thanks for sorting.

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By NH
13th Nov 2017 13:24

Are you honestly trying to say that in this day and age someone would be deeply offended if you included that "profane" username, WTF?

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to NH
13th Nov 2017 13:46

Hi NH, thanks for your comment.

This one isn't really about causing offence, it's just that we literally can't include it in articles, comments or posts without it being picked up and replaced with [***] by our profanity filter, so it would look a bit bizarre.

I tried to style it out with a literary gag, but unfortunately that seems to have fallen a bit flat...

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By NH
to TomHerbert
13th Nov 2017 13:57

lol fair enough, if the computer says no what else can one do!

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By cfield
14th Nov 2017 12:08

Love the socks Tim, but couldn't you get a matching pair?

I have one question concerning the answer to the travel expenses query. If the director only goes to London once a week for meetings, does the office he goes to really count as a permanent workplace? As he works from home too, is that not his real permanent workplace?

I know that you can have more than one permanent workplace (or maybe none at all) but it strikes me that the meetings count as self-contained tasks rather than part and parcel of his duties there, so should be treated the same as an engineer visiting a place regularly to do safety checks.

I believe there is an example in Booklet 490 that bears this out. At the end of the day, I guess it depends on the length and purpose of the visits. If they take all day every week, or if he has go in every week regardless of whether there is anything to talk about or not, then I suppose it would indeed be a permanent workplace. Otherwise, I don't see why that shouldn't be a temporary workplace too in line with the 40% rule. In that case, both the meetings and the client visits (assuming they aren't permanent workplaces in their own right) would be tax deductible.

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to cfield
15th Nov 2017 09:42

Have a look at https://www.gov.uk/government/consultations/travel-and-subsistence-frame... paragraph 1.1.
In particular "any workplace that an employee attends regularly on an ongoing basis will be a permanent workplace, and so no tax relief would be available on the employee’s journeys from their home to that workplace".
It really all depends (as you rightly note) on the circumstances of each case.
PS Paul Smith John Lewis. I asked for a discount because they didn't match.

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