Are these expenses legit?

[RB Will]

Chatting to a mate about his business partner’s expenses and we are not sure if they are ok to claim or if it’s going to get them in trouble?

2 directors but a couple of years ago one semi retired and moved about 100 miles away. He comes into the office about once a week but when he does he now claims the mileage for this and occasionally a hotel room.

He does 2-3 days a week on client sites also claiming the same expenses.

Can he claim the trip to the office? Or since he spends more time at a client site should that be classed as his place of work and no expenses for there instead?

Or another option?

[miniman]

Do you mean from a tax point of view, or a corporate point of view?

If the location is stated as his place of work, I doubt he can avoid at least BIK on those expenses. The company can pay him whatever expenses it wishes. My understanding is that the taxation is his problem.

[RB Will]

it’s the risk to the business that concerns him.

So In basic terms the guy can claim what he likes as long as he declares it on his self assessment ?

[PHuzzy]

If he only goes into the office 1 day a week and works from home when not visiting client sites then I'd class his home as main place of work and a commute to the office would be the same as visiting any other site.

At our place we have specific homeworking contracts set up for some staff. If they commute to the office then they can claim that back on expenses without an issue.

[Doofus]

I'd be more concerned that your friend can't, or won't discuss this directly with his business partner. On the face of it, it doesn't sound like a very functional relationship.

[Eric Mc]

RB Will said:

it’s the risk to the business that concerns him.

So In basic terms the guy can claim what he likes as long as he declares it on his self assessment ?

Expenses paid to a director is not just a Self Assessment issue.

Directors receive their remuneration in the form of salary and Benefits in Kind. As I'm sure you know, the primary responsibility for calculating and deducting the correct tax on salaries and BIKs falls on the employer and the PAYE system.

Therefore, if this director is being paid travel expenses which should be taxable (i.e. normal commute type expenses) then the onus is on the employer to declare these expenses on the P11D (or through the more modern Payroll BIK system) so that the director's PAYE Tax Code is suitably amended and he pays the correct PAYE on his salary from the company.

If an employer fails to administer the BIKs correctly, they are liable to fines of up to £3,000.

If the director also completes Self Assessment tax returns, he also has to state these BIKs correctly on his tax return. However, HMRC should already know about them because the employer would have notified HMRC earlier in the year through the BIK reporting system.