P11D and Expenses Question

[enteruk]

Hi,

I am doing my P11D for the first time and want to do in correct. I will be really grateful if you have a look at my circumstances and answer few questions below:

I am foreign national from another EU country and had been working in the UK for few years as IT specialist.

In 2012 I was made redundant and was unemployed for 5 months. I have returned to my home country for short period, but then decided to try to get temporary/contract employment in the UK.

In 2013 I have got IT contract, started a Limited company in the UK and worked under the contract for 3 months initially and two extensions (overall 9 months) until the project was completed. So I am a director and only employee of the Limited company and this work place fully comply with 24-month rule.

After the end of the contract I come back to my home country and currently looking for new contract again in the UK or other EU country.
So I did not have permanent workplace and rented studio flat for job search period (4 months) and for temporary work period (9 months) exclusively for purpose of temporary employment.
I have come across very similar example in item 7.6 of 490 Employee Travel.pdf HMRC document and it says that lodging expenses are allowable for tax relief in such case under general expenses rules.
I have paid rent from my personal account and have all supporting documents and statements.
I have attended HMRC expenses webinar and ask this question to them and they answered that I can have the relief for studio rent when calculating profit for Corporation Tax for my Limited company.

Could you please double check and answer?
1. Am I allowed for tax relief for studio rent costs for the period of contract as accommodation expenses was wholly related to the temporary employment?
2. Is relief available for studio rent costs for job search period (4 months) before I found out the contract?
3. Should these amounts be reported on P11D form and in which section if payments are allowable for relief?
4. In what section Season Train tickets expenses should be reported?
5. Use of small amounts (£5 - £15 per month) for mobile phone Pay As You Go for business talks. Is it allowable for relief?

Thank you,

[northernladuk]

As much as I probably bore everyone with the same line surely it's worth paying a few hundred quid to an accountant to look in to this particularly when it could be fairly complex? Get it wrong and it could cost a whole lot more IMO. I bet there are a lot of things you have missed that could save you his rate.

Save yourself some money and speak to a professional.

[TheFaQQer]

1. Am I allowed for tax relief for studio rent costs for the period of contract as accommodation expenses was wholly related to the temporary employment?
2. Is relief available for studio rent costs for job search period (4 months) before I found out the contract?

I'm not entirely clear from your post what your exact accommodation situation was. If you had somewhere else to live, and were only using the accommodation provided by the company so that you could fulfil the contract, then you can claim tax relief on that.

If you were using the accommodation because you had nowhere else to live, then that's not a valid business expense, because you need to live somewhere anyway.

If you were staying in the accommodation Monday to Friday for work, and then weekends when you weren't working, then 5/7 of the cost can be expensed, but not the weekend - assuming that you had somewhere else to live.

5. Use of small amounts (£5 - £15 per month) for mobile phone Pay As You Go for business talks. Is it allowable for relief?

If you can show that the costs incurred were business expenses, then you should claim that back from your company and that becomes an expense to the business to reduce the corporation tax bill.

If you haven't claimed the expense from the company, then there probably is a way to do this, but you need to discuss with an accountant, rather than just posting questions on a forum.

There are many things that you could get wrong here, and they will be expensive to rectify.

[TheCyclingProgrammer]

IANAA, so this is just my non-professional opinion:

1. Am I allowed for tax relief for studio rent costs for the period of contract as accommodation expenses was wholly related to the temporary employment?

Accommodation is an allowable expense insofar as it relates to work at a temporary workplace however you need to have another permanent residence for this to apply. If the rented accommodation was your *only* accommodation, then there is an inherent duality of purpose (you have to live somewhere) and it wouldn't be allowable.

See example 1:
EIM31817 - Travel expenses: general: accommodation and subsistence: subsistence costs that are not attributable to the travel: no permanent home: examples

You would be entitled to travel between the flat and your temporary workplace though.

2. Is relief available for studio rent costs for job search period (4 months) before I found out the contract?

No as its not attributable to any business travel or travel to a temporary workplace.

3. Should these amounts be reported on P11D form and in which section if payments are allowable for relief?

If payments have been made for living accommodation (that does not relate to business travel) then yes they do need to be put on your P11D. There would also be Class 1A NIC to pay on the benefit.

See:
HM Revenue & Customs: Living accommodation

4. In what section Season Train tickets expenses should be reported?

Assuming the season ticket was provided for travel to the temporary workplace and the season ticket was provided as it was cheaper than paying for individual journeys, then it would be allowable and would normally appear in Box N. If the season ticket was provided for use outside of your contract, then it will probably be a taxable benefit and may appear in a different section of the P11D. I'm not 100% sure.

5. Use of small amounts (£5 - £15 per month) for mobile phone Pay As You Go for business talks. Is it allowable for relief?

The cost of your business calls is allowable if you can show evidence of the calls. Your company can reimburse you but they need to be reported on the P11D. You'll need to make a claim for the relief on your self-assessment (as you also have to for business travel).

Finally, as a general rule, if a company pays for something and its wholly and exclusively for business purposes, it will normally be allowable for corporation tax relief. This includes expense payments made to employees, even if there is a BIK or taxable on the employee. So to take your living accommodation example, even though its a BIK and YourCo would have to make Class 1A NIC payments on the benefit, the cost of living accommodation should still be an allowable expense for YourCo. You should note though that some non-allowable employee expenses not only incur extra NIC, but may also be taxable as earnings too so even if YourCo saves on its CT bill, you just end up with a higher income tax bill.

[enteruk]

As much as I probably bore everyone with the same line surely it's worth paying a few hundred quid to an accountant to look in to this particularly when it could be fairly complex? Get it wrong and it could cost a whole lot more IMO. I bet there are a lot of things you have missed that could save you his rate.

Save yourself some money and speak to a professional.

I have got you point.

It is not complex and probably someone who would really like to help will answer. This is the main purpose of this site, I believe.

[TheCyclingProgrammer]

It is not complex and probably someone who would really like to help will answer. This is the main purpose of this site, I believe.

Actually some expenses rules can be complex, which is why even though I just gave you a detailed answer, you should still be consulting with an actual professional.

[LisaContractorUmbrella]

I have got you point.

It is not complex and probably someone who would really like to help will answer. This is the main purpose of this site, I believe.

With all respect if it's not complex then why did you need to ask the question in the first place? Actually expense rules are extremely complicated and advice on here can only be based on information given - it really is in your interests, if you are going to run a business, to work with a professional acountant

[enteruk]

If you were staying in the accommodation Monday to Friday for work, and then weekends when you weren't working, then 5/7 of the cost can be expensed, but not the weekend - assuming that you had somewhere else to live.

Thanks for the answer!

Yes, this is similar to my case and 5/7 of the cost that can be expensed sound reasonable.

As to another place to live - yes, I have, but in another country, the flight take 3 hours, so it is too difficult to go back home for weekends.
So I believe in such case the 5/7 of rent cost should be allowable.

[enteruk]

IANAA, so this is just my non-professional opinion:



Accommodation is an allowable expense insofar as it relates to work at a temporary workplace however you need to have another permanent residence for this to apply. If the rented accommodation was your *only* accommodation, then there is an inherent duality of purpose (you have to live somewhere) and it wouldn't be allowable.

See example 1:
EIM31817 - Travel expenses: general: accommodation and subsistence: subsistence costs that are not attributable to the travel: no permanent home: examples

Thanks for the answer.

I have read the examples. I have permanent home outside the UK. The example2 is very strange - it sounds like you have to sell your permanent home in Germany in order to attribute the UK's rent cost for 3-9 months to business travel.

[northernladuk]

Thanks for the answer!

Yes, this is similar to my case and 5/7 of the cost that can be expensed sound reasonable.

As to another place to live - yes, I have, but in another country, the flight take 3 hours, so it is too difficult to go back home for weekends.
So I believe in such case the 5/7 of rent cost should be allowable.

And what is your conclusion on this one?

2. Is relief available for studio rent costs for job search period (4 months) before I found out the contract?