The issue of travel and subsistence is considered to be one of the most problematic and grey areas within small business accounting, particularly for self employed individuals.
The basic reality is reasonably simple; in order to qualify for tax relief, any expenditure must be wholly and exclusively incurred for the purpose of the trade. Where an expense is incurred for a non trade or private purpose then no tax relief is available.
Situations may arise where an expense is incurred for more than one purpose; this may create a deduction using appropriate apportionment; This assumes there to be an identifiable proportion that could be deemed as incurring wholly and exclusively for the trade.
The main travel method claimed is car journeys; motoring costs are normally apportioned based on the ratio of business miles to total miles. This makes it essential to keep a log of business journeys. See my other blog post on the approved mileage scheme.
Other types of travel that generally qualify for relief are:
- Public transport fares, including taxi’s, bus and rail travel.
- The cost of hotel or bed and breakfast accommodation can be claimed as an expense, as can the reasonable cost of additional meals taken in conjunction with overnight accommodation. You can claim actual meal costs whilst you are working at a remote site, away from your normal place of work, or when staying away from home overnight.
- Toll fees, Congestion charges and Parking fees can all be claimed (not parking or speeding fines)
However, you must remember that to get tax relief they must be trips for business. Things that aren’t directly related to the business journey such as your newspaper are not allowable.
When HMRC are investigating or reviewing claims for travel expenses in a set of accounts they will naturally expect to see receipts for the expenditure; however, they will also look at your diary/ appointment log so be prepared to pass them this information. It is good practice to keep an accurate record of your appointments in any case.
For help and resources please check out the PAH Accounting resources page where there is an expense claim template as well as other useful information.