Monthly Archives: September 2016

Can I claim the cost of meals and clothing against my taxable profits?

Can I claim the expenses of a meal whilst working / Can I claim for clothing?

A regular question that is often asked is can I claim expenses in respect of meals.
We are aware that some accountancy practices are recommending that the cost of meals if a receipt is obtained, can be claimed against your profit.

It is our opinion that this is not always correct.

We contacted HMRC recently and the question was asked as to whether this was a legitimate expense.
We believe that the claiming of expenses in respect of meals taken will be regarded as inadmissible, particularly if it is claimed on a regular basis.

If HMRC decided to review or launch an enquiry into your self assessment return, they will review every expense claimed. Besides looking at receipts to prove the expense was incurred, they will look to see if the cost is justifiable and allowable.

However again it is our understanding that to claim expenses on a regular basis is dependent on the reason for the claim.

Tax law can be very misleading and there can be grey areas which are open to interpretation. For those interested in tax cases there are some facts from those the cases detailed below.

So, if a taxi driver is operating in what can be described as their local area which again is not that easy to define, but say for example most of the journeys are no more than 1 to 2 hours return journey time or under that timescale, then there is no justification for claiming for meals taken in that typical day.

If for example a journey exceeded five hours, and say in multiple five hours, ten or even fifteen hours which would be exceptional, then the receipted cost of a meal(s) taken we believe would be acceptable to claim.

A record of this exceptional need to claim for a meal as you are operating out of your normal area ( eg London to Manchester trip) should be maintained with specific information recorded and one would expect the receipt would show the purchase of a meal away from your normal operating area. Don’t forget that as a private hire driver all of your journeys are recorded so HMRC would have the opportunity to check that any claim is justifiable against the logged trip made.

Clothing would only be allowable, if the operator you are working for stipulates clothing with a company logo on has to be worn. The nominal cost of cleaning that clothing say £2 a week would be admissible.

We know that this is a controversial subject and would advise that anyone who queries this should themselves contact HMRC for confirmation that this procedure is correct.

Don’t forget that where a self assessment return is seen to be incorrect and the amount of tax/national insurance has been underpaid as a result of an incorrect expenses claim, then HMRC will pursue the lost tax national insurance and will also charge interest and additional penalties.

So BEWARE, don’t just believe what someone else has told you.

Feel free to contact HMRC yourself for their opinion, they are there to assist and help everyone.

The telephone number is; 0300 200 3310

We hope that this explanation is of assistance, not something everyone wants to hear, but  we are only trying to protect our clients.
Paul Taylor
PBT tax solutions
Acting for Taximanager.co.uk

The Carpenter’s Lunch – Subsistence Expenses for the Self-Employed

 

Mr Quinn was an itinerant carpenter who worked on numerous building sites. It was not possible for him to go home for lunch so he claimed to deduct the extra cost of the lunch he bought for himself at wherever he was working – he estimated the cost was 40p, as compared to the cost of a lunch at home of 10p – this all took place in 1975 – so he claimed the 30p difference.

 

Mr Quinn’s tax inspector, who rejoiced in the name of Caillebotte, did not agree and he disallowed the claim. In order to be deductible, an expense must be incurred “wholly and exclusively” for the purposes of the business, and as we all have to eat in order to live, you cannot separate out a part of the cost of the food and call it a business expense, said Mr Caillebotte.

Mr Quinn went to court about this, and lost. Subsistence expenses are one of a number of costs that a self-employed person cannot deduct because of this “duality of purpose”.

The other famous case involved the barrister, Baroness Mallalieu, who lost her claim to deduct the cost of her court clothes – the wig and gown were OK, but the normal smart business clothes she wore underneath were not, even though the court accepted that she did not like a formal style of dress and only wore the clothes in court.

Just as we have to eat in order to live, we wear clothes for “warmth and decency” as well as for the requirements of our profession. Uniforms and protective clothing are allowable, but ordinary civilian clothing is not.

HMRC are not quite as harsh about subsistence as Caillebotte v Quinn would let them be. They do allow the cost of food and drink, provided it is “reasonable”, in two situations:

The Trade is Itinerant
Where it is part of the very nature of the business to travel, the cost of subsistence and accommodation while travelling is allowable. An example could be a self-employed travelling salesman, or a taxi driver.

 

The Journey is “Outside the Normal Pattern”
Those of us who are self-employed and have a base from which we normally work – home for some, an office or workshop for others – can only claim the cost of subsistence if we make a journey that is outside the normal pattern of our business activities.