Contractor guide to accommodation expenses

When working on projects far from home and even overseas, contractors often have no choice but to check into hotels or serviced apartments given the time, effort and cost involved with making their way to their client’s office and back home again, writes Troy Stevens, director at QAccounting.

If this is a situation you find yourself in, and you need to stay overnight close to your client’s premises, you might be wondering whether you can claim the cost of accommodation as a legitimate business expense for your limited company.

In this detailed but straightforward guide to contractor accommodation, we’ll answer this question and focus on several other important areas that you might want to take into consideration when staying overnight to execute a temporary business contract.

Firstly, can contractors claim accommodation as a business expense?

The short answer is ‘Yes.’ If the cost of any temporary accommodation is incurred as a result of your business, then it can be treated as a justifiable business expense.

In which scenario does accommodation qualify as a legitimate business expense?

As a limited company contractor, you can claim accommodation as an expense when you are staying away from your permanent residence for business purposes only. There is no real maximum cap on how much can be claimed as long as this is treated as “reasonable” in the eyes of HMRC.

Are there any specific rules when it comes to overseas accommodation?

The same rules apply to both UK and overseas accommodation. Most contractors staying overseas use the ‘per diem rule’ which is allowable by HMRC and provides a flat rate to claim for accommodation. It’s worth bearing in mind that this rate varies depending on the country you’re staying in, so you might want to read the HMRC guidelines here.

Do meals out when staying away for work also qualify?

Somewhat. When staying away for business purposes, there is a subsistence allowance of £5 per day if you work for more than 5 hours, or £10 each day if you work for more than 10 hours. The cost of evening meals is also allowable in addition to this subsistence allowance if you are staying away overnight.

Are there any other justifiable expenses that qualify when staying away for work?

Not that it’s a surprise, but HMRC is quite strict on its allowances when staying away. However, in addition to being able to claim for the cost of travel, the accommodation itself and subsistence, the taxman also allows “personal incidental expenses,” to put towards the cost of phone bills, laundry and newspapers, for example. This is a £5 per night allowance should you be staying in the UK, increasing to £10 per night when staying overseas.

What doesn’t qualify?

When staying away on business, aside from the above allowances, the same rules apply with regards to legitimate business expenses -- so not a huge amount changes.

It’s also important to note that the cost of individual meals is not allowable while staying overnight on a business trip. Only the subsistence allowance mentioned above along with the evening meal will qualify.

What kind of accommodation can I stay in?

From a hotel to a serviced apartment right through to flats you can find on Airbnb; all temporary accommodation is deemed acceptable by HMRC.

Would buying a property, to be used for when I stay away on work trips, be a justifiable business expense?

In certain circumstances, yes, but only when it’s cheaper to rent or buy a flat rather than, for example, pay for a hotel while on a business trip. The use of the property should be necessary for the business trip and you must also have a permanent place of residence elsewhere.

What about booking a working escape -- can contractors claim this as an expense?

Afraid not. Generally speaking, any accommodation booked out of choice and not as a necessity is not an allowable expense. While a booking to stay away for a handful of days while you focus on business ideas or development might be beneficial, the fact that you are not required to do this means HMRC doesn’t deem it as an acceptable expense. Told you they were strict! Generally-speaking, if in doubt with contractor accommodation expenses or allowances, ask a trusted tax or accounting adviser.

Monday 2nd Sep 2019
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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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