Contractors' Questions: Are my weekly flights tax-deductable?

Contractor’s Question: I’m the director and sole employee of my own limited company and live in Spain. My business is UK-based and registered at my accountant's address and I use my parent's address as my UK residential address.  When I set up the company, I asked if my weekly flights to and from my employment in the UK -- which I deem temporary as I am a consultant -- would be deductible and was told not, on the basis I have a UK-based business and I am working in the UK. But this ContractorUK article appears to suggest that the weekly flights would be deductible; please advise.

Expert’s Answer: While contractors in situations similar to your own may be able to claim travel expenses, your ability to offset any of your costs is entirely dependent on your own personal circumstances and hinges on two points: your residency and working status.

Firstly, it’s important to clarify what you deem as temporary employment, as any expenses for travel and accommodation can only be claimed or offset if an employee is working at a ‘temporary workplace.’ Defining a placement as temporary requires a timestamp, which in the eyes of the UK taxman is normally around a few months. Tax authorities in the UK will be likely to challenge you on your definition of temporary employment, so it’s important to state the length of your contract, the location of your work and where you reside when in the UK.

Based on your permanent residency in Spain, and the assumption that you spend Monday to Friday working in the UK, if your UK accommodation was temporary, e.g. a hotel, your travel and accommodation costs may be offset. However, if the tax authorities suspect that you reside in the UK permanently, or use other factors to argue that your position is not in fact temporary, there is the chance that your request to offset expenses may be refused and that additional tax and National Insurance contributions will be due.

In summary, your ability to claim any expenses will come down to an assessment of your individual circumstances. You can certainly maximise your tax situation, however, costs can only be offset based on your residency and working status. Therefore clearly stating the length and location of your employment is of utmost importance. Seeking expert advice is the best way to determine which costs you may be able to offset and to ensure that you are working compliantly.            

The expert was Matt Walters, head of operations at overseas contracting advisory Capital Consulting.

Wednesday 10th Feb 2016
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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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