accommadation & Fuel

[pauljason]

Good Evening

I have been contracting for 2 years now but all my contracts have had accommadation provided. I have now contracted away with a rotation of 15 days on and 6 off.

I have rented a flat on a day rate. Does this count as a business expense and should i pay it through the business account this will include council tax ?

Can I also pay for fuel for business work out of my business account ?

Thanks in advance

[prozak]

Good Evening

I have been contracting for 2 years now but all my contracts have had accommadation provided. I have now contracted away with a rotation of 15 days on and 6 off.

I have rented a flat on a day rate. Does this count as a business expense and should i pay it through the business account this will include council tax ?

Can I also pay for fuel for business work out of my business account ?

Thanks in advance

Rent - Yes. Business Expense.

Fuel - you are better off claiming mileage, much easier. 45p/mile for the first 10k miles, 25p thereafter. Having said that beware that there is a 2 year rule which impacts your ability to claim travel expenses if you are travelling to the same place of work for 2 years+

[ASB]

Good Evening

I have been contracting for 2 years now but all my contracts have had accommadation provided. I have now contracted away with a rotation of 15 days on and 6 off.

I have rented a flat on a day rate. Does this count as a business expense and should i pay it through the business account this will include council tax ?

Can I also pay for fuel for business work out of my business account ?

Thanks in advance

Do you maintain another permanent address? If so the flat is probably claimable, if not no it isn't.

[northernladuk]

You can pay the fuel out of your personal accounts and expense it back to yourself through your LTD (assuming you are using LTD and not brolly). Flat would be much cleaner coming from the business.

Regarding the comments about 2 years, look for information on the 24 month rule in the links to the right or the web. It has to be same geographical location and include 40% on time. If these locations are different then you don't need to worry about it.

[Greg@CapitalCity]

Can I also pay for fuel for business work out of my business account ?

No, don't do that. The problem is the tax office would have no idea whether you use the fuel for business or pleasure. Any motoring claims must relate to miles travelled. In relation to a privately owned car that you use for business travel, you must claim the appropriate mileage rate - HM Revenue & Customs: Travel - mileage and fuel allowances

[ASB]

In relation to a privately owned car that you use for business travel, you must claim the appropriate mileage rate

Greg,

I realise that is standard advice. But I do wonder if it is the case that there may be circumstances when it would be better to claim nothing from the company and instead just claim relief on ones SA return if a 40% or more taxpayer?

My thought for this is that if one didn't claim the (say) 5k on expenses this would increase the company profit by 5k and hence crystallise an extra £1250 CT liability.

However in this case if the 5k was claimed through the tax return this would have the affect of reducing the amount liable to 40% tax by 5k, thus saving 2k.

I think that if one were actually paying the remaining 3750 in the company coffers as an additional dividend then it would work out exactly neutral, but if not doing this it seems there might be a modest tax saving to be made overall.

Thing is this seems a bit too easy so I imagine there must be a flaw in it somewhere.

Given I'm not in this position I can't be bothered to work out the figures to see if there is a flaw or not.

[Greg@CapitalCity]

Well.....I guess that could be done, but here is what I think;
(1) Putting employment-related expenses through on your personal tax return is often a flag to the HMRC to query the return (excluding P11D expenses). Not many people incur expenses in relation to their employment without seeking some form of reimbursement from their employer, hence the reason it sticks out a little. And assuming you would fly through a compliance visit anyway, its just not something I think you should invite - especially with the amount of miserable tax inspectors we have;
(2) You could look at the tax angle a couple of ways, but the way I see it, if you are a higher rate tax payer working through your own ltd company, then you NEED the money you take from your company to live on. And if you need the money, then in relation to travel, you have to take dividends from your company to pay for things like fuel, car maintenance, and bonnet-mounted reindeer antlers. Your other option is to claim the mileage expense from your company, and receive the money tax free personally. That way you avoid the higher rate dividend tax on paying for these items personally (and its the higher rate dividend tax that destroys your proposition);
(3) I think the other thing you might be alluding to is, as a higher rate tax payer, you would be better off NOT claiming the expense through the business to save only 20% tax, then claim it through the personal tax return instead saving 40%, and extract your money out of the company tax efficiently when you get a chance (like if one year you only work for 3 months, but continue to draw dividends up to the higher rate earnings threshold, or else close using ESC C16). While this would be more tax efficient, I can't think of a scenario where this would apply that simultaneously justifies the contractor taking earnings from the business above the higher rate earnings threshold.

Jeez, that is a long post - sorry for the number of words! Hope its useful.

[ASB]

Thanks for that comprehensive reply Greg.

In summary then it would only actually gain a practical advantage in a situation where one was a higher rate taxpayer because of other income and wasn't taking any income or dividends from the company.

Any advantage anyway would be limited and it is likely to draw attention to oneself because the tax return would be a little unusual.