Q. My company does not have a credit card and therefore I use my own personal credit card to pay for some expenses – particularly any purchases made online as a credit card gives an extra layer of protection. I also use the card for some personal expenses. Every month I pay the full balance owing on the statement for the previous month from the business bank account. How is this to be treated in the accounts?
A. In effect you are overdrawing your director’s loan account for the personal expenses and repaying it later. HMRC will consider this as a beneficial loan taxable under the benefit-in-kind rules. However, there is a threshold of £10,000 below which the official rate of interest benefit-in-kind charge is not applied. Additionally, where a director or employee receives an advance for expenses necessarily incurred in the performance of their duties, the advance is not treated as a loan, provided that:
a) the maximum amount advanced at any one time does not exceed £1,000;
b) the advances are spent within six months and
c) the director or employee accounts to the company at regular intervals for the expenditure
Therefore so long as the above conditions are adhered to then there will be no problem throughout the year. At the end of the year you should calculate the amount paid in relation to personal expenses and make good that amount – this is usually done via a dividend or you could make reparation from personal resources.
Q. The company for which I am a director has been approached by a local charity to make a donation. The charity is a school attended by a fellow director’s grandchildren. Is that allowed? What are the tax implications?
A. HMRC list three conditions that, if satisfied, will disallow tax relief under what is termed ‘tainted’ donations. All three conditions are required for it to be a ‘tainted’ donation:
Condition A – the donation to the charity and arrangements entered into by the donor are connected.
Condition B – the main purpose of entering into the arrangements is for the donor, or someone connected to the donor, to receive a financial advantage directly or indirectly from the charity.
Condition C – the donation isn’t made by a qualifying charity-owned company linked with the charity to which the donation is made.
Condition B is the condition that might impact on whether the donation is tax deductible. However, if it can be shown that no financial advantage is being gained by the donation (e.g. full school fees are being paid for the school child), then there is no financial advantage being received and the donation is allowed.
Q. I am the sole director of a company and my office is based at home. For historical reasons many of my clients are based in the South of England whereas I live in the North. Therefore I spend most of the week on the road, staying in hotels, returning to my home office on Fridays to undertake administrative work. What can I claim for subsistence? Am I only allowed the daily allowance of £5/£10 per day, or can I claim the actual cost of meals that are likely to cost more than the set allowances?
A: You can claim the full hotel costs and the costs of the meals because these expenses are deemed necessary for the performance of your employment duties. To learn more see HMRC’s Employment Income Manual at EIM31815 – Travel Expenses General -Accommodation and subsistence – include associated subsistence.
The text states that ‘travel expenses’ for this purpose include the actual travel costs ‘together with any subsistence expenditure and other associated costs that are incurred in making the journey. This includes:
- any necessary subsistence costs incurred in the course of the journey
- the cost of meals necessarily purchased whilst an employee is at a temporary workplace
- the cost of the accommodation and any necessary meals where an overnight stay is needed – this will be the case even where the employee stays away for some time’
HMRC gives examples at EIM31816 that mirror your situation (example 2).
Also see HMRC Guidance: https://www.gov.uk/guidance/business-journeys-tax-relief-490-chapter-5