Tax subsidised Christmas shopping trip

You're attending a big trade fair and your spouse fancies coming along to go last-minute Christmas shopping in the nearby town. What proportion of the costs can your company claim as a tax deduction?

Free time is your time

In general terms the company can claim a full tax deduction for genuine business travel and for the cost of related hotel accommodation and subsistence. But there is a condition - the costs must be incurred “wholly, exclusively and necessarily for the furtherance of the trade”. So, in this example, all of your travel and accommodation costs should be deductible - what you choose to do in the hours when not at the trade fair is none of the Taxman's business. Problems may arise with your travelling companion if he or she is there in a non-business capacity. Some careful planning is required.

Spouse, partner, secretary

Naturally, if another employee accompanies you on the trip his or her expenses will be deductible in the same way as yours. But if the employee is also your spouse, a tax inspector might get a little suspicious.

Tip. Make sure you have evidence to show why your spouse/employee is attending, e.g. minutes of meetings attended, a pass for the trade fair, etc.

If your spouse is not an employee his or her attendance will not disqualify your business trip. However, if the company pays for the spouse you'll have to pay tax - unless you can show that he or she attended to assist you with the trip. For example if you visit a trade fair in, say France, and your wife is fluent in French, her costs could legitimately be claimed as those of an interpreter. The Taxman will need evidence of practical qualifications. She might attend in a consultancy capacity, perhaps because she's skilled in marketing. You'd need to show membership of a recognised professional/trade body or a relevant sideline business.

Accommodation

Hotel. Hotel costs are 100% deductible. It doesn't matter what class of hotel you stay in - the same rules apply whether it's a deluxe five star or a cheap and cheerful B&B. A tax inspector may be alerted by irregularities - try to be consistent in the type of accommodation you choose.

Tip 1. Prepare a written policy on acceptable accommodation for different levels of employee.

Naturally, you should always keep receipts. Trouble is, if the hotel bill says something like “Two nights accommodation for two people at £79 per person per night”, you won't be able to claim a deduction for the cost of your spouse's stay.

Tip 2. Some business people choose hotels that charge for the room on a flat rate per night (irrespective of occupancy) basis.

Tip 3. If the trade fair only lasts two days don't be tempted to stay on for much longer - or you might arouse suspicions.

Meals. In addition to your actual accommodation costs you can also claim the full cost of subsistence, i.e. meals. But you can't get a deduction for your spouse if she is there for non-business reasons.

Tip. If you eat in the hotel you might have heard that it's possible to ask for a global bill at the end of your stay. This will simply state the overall charge for the room and meals. This is unlikely to arouse suspicion especially if you don't eat too expensively.

Other expenses. As an employee the company can pay you £5 per night (£10 if overseas) for incidental expenses. Not enough to cover her shopping trip but every little helps!

Practically all costs associated with a business trip are deductible. You can also claim your spouse's if she attends, e.g. in a consultancy role. Book hotels that charge a flat rate per night rather than per person.

For any more information or advice on this matter, please give us a call on 0191 386 4786 and we'll be glad to help!

Tax subsidised Christmas shopping trip

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