If you’re self-employed and you travel on business, it’s useful to know which expenses are tax deductible.
If you get it wrong, you could pay too much tax, or maybe find yourself in trouble with HMRC for paying too little tax.
Above all you need to consider why you made the journey. If the journey was wholly and exclusively for business purposes, and it’s not ordinary commuting, then it will be allowable.
A couple of examples:
The chairman of a multinational firm hired a helicopter to take him from London to Paris for a meeting, then back to the UK for another. He could have taken a business class ticket on a plane at a fraction of the cost. HMRC challenged, but then accepted the claim because the motive for using the helicopter was wholly a business one, as he could not have made both meetings if he had taken scheduled flights.
A solicitor visited America and Canada to attend a conference. He took the opportunity to take his wife with him for a holiday at the same time. The solicitor claimed a tax deduction for just his portion of the expenses, but unfortunately for him the whole of the expenditure was disallowed. The purpose was not ‘wholly and exclusively’ for business, but also to take a holiday, and the two could not be separated.
There is no need to choose the cheapest method of travel – think how much those executives are paying in Business Class. It’s the nature, rather than the amount, of the expense which determines whether it is allowable
Next time you’re out working for the day, and you think about grabbing a sandwich and coke for lunch, could you make it caviar and champagne instead? HMRC say that expenses must be ‘reasonable’ and would presumably look to disallow excessive expenses on the basis that they weren’t wholly for business purposes. So, remember the Italian proverb – Big Mouthfuls Often Choke.