Claiming subsistence expenses with no primary residence

[danny tattersall]

I want to settle a debate that I have been having with a friend of mine (yes, really 🙂). He doesn't own or rent his own home so lives wherever his latest contract job is. Due to the specialised natute of his work these are all inevitably well beyond commutable distance from his parent's house, so his official primary residence is nothing more than a postal address in effect. The question is, can he legitimately claim back his expenses for 'living away from home' via his Limited Company? I'm sure that he won't be the only person to do so, but I don't believe that it is correct to do so. Of course, if he had an actual primary residence, rather than one for convenience, it would be fine to claim back the costs. However, I think his situation is different and he shouldn't be claiming them as legitimate expenses.

Thanks in advance,

Danny.

[Simpo Two]

To be a company director but have no nowhere to live seems rather an oversight to me. Time he checked out of mum and dad's house IMHO and stood on his own two feet.

Anyway, I'm no accountant but assuming his client doesn't pay for his accommodation, so he has to pay for it out of his profit, wouldn't it be 'cost of sales'?

[s2sol]

danny tattersall said:

I want to settle a debate that I have been having with a friend of mine (yes, really ??). He doesn't own or rent his own home so lives wherever his latest contract job is. Due to the specialised natute of his work these are all inevitably well beyond commutable distance from his parent's house, so his official primary residence is nothing more than a postal address in effect. The question is, can he legitimately claim back his expenses for 'living away from home' via his Limited Company? I'm sure that he won't be the only person to do so, but I don't believe that it is correct to do so. Of course, if he had an actual primary residence, rather than one for convenience, it would be fine to claim back the costs. However, I think his situation is different and he shouldn't be claiming them as legitimate expenses.

Thanks in advance,

Danny.

Where does he live when he's not at work? Where does he keep his possessions when he's not at work?

I've got my doubts about the motivation behind your question.

[danny tattersall]

When he is in between contracts he lives wherever the latest contract was and stays there until he finds a new contract. He is nearly 50 years old and has been contracting for over 20 years. However, he doesn't work a lot of hours (30 or so) compared to most contractors and doesn't have much money or many possessions. His view is that if he doesn't have much 'they' can't take it away from him. For example, he permanently has a a hire car on long term hire and claims that through his company because he doesn't trust insurance companies due to some dealings that he had with them in the past. As a result he refuses to buy a car and personally insure it! He obviously has a few mental hang ups, but it is a genuine question and I have no intention of using any information gleaned negatively towards him. It is up to him, his accountant and his conscience what he puts through his company expenses. My interest in it is purely to settle the debate and perhaps advise him that he may not be doing things correctly.

Edited by danny tattersall on Tuesday 12th May 22:10

[Simpo Two]

I'd say that if he's in a B&B then he can claim for the duration of the contract but not the rest of the time he's there. From your first post I took it that he went back to his parents between jobs.

Does he add accommodation onto his bill?

[danny tattersall]

Simpo Two said:

I'd say that if he's in a B&B then he can claim for the duration of the contract but not the rest of the time he's there. From your first post I took it that he went back to his parents between jobs.

Does he add accommodation onto his bill?

No he doesn't add accomodation onto his bill; it is paid for out of his daily rate. I interpret his situation as being like a Benefit in Kind and therefore subject to tax. He is not actually incurring additional costs due to having to work away from home because he only pays for one place whereas most people have their own home and pay for two when they are working away from home. The situation with his hire car is similar. He uses it for business and private uses but pays nothing for private use. HMRC treat the personal use of a vehicle paid through expenses as a Benefit in Kind, presumably because you are saving on the costs of having to pay for your own personal transport needs.

[anonymous-user]

the phrase "wholly and exclusively" is probably relevant here

point him here, if he wants to wander down the rabbit hole

https://www.gov.uk/hmrc-internal-manuals/business-...
https://www.gov.uk/hmrc-internal-manuals/business-...
https://www.gov.uk/hmrc-internal-manuals/business-...
https://www.gov.uk/hmrc-internal-manuals/business-...

[danny tattersall]

JPJPJP said:

the phrase "wholly and exclusively" is probably relevant here

point him here, if he wants to wander down the rabbit hole

https://www.gov.uk/hmrc-internal-manuals/business-...
https://www.gov.uk/hmrc-internal-manuals/business-...
https://www.gov.uk/hmrc-internal-manuals/business-...
https://www.gov.uk/hmrc-internal-manuals/business-...

Thanks for that. I'll forward that onto him and let him make his own mind up whether he continues as he is.

[Sheepshanks]

danny tattersall said:

The question is, can he legitimately claim back his expenses for 'living away from home' via his Limited Company?

So, he's an employee and his employer is instructing him to stay in a certain place, whch isn't his home address, and covering his costs as expenses - what's wrong with that?

[Countdown]

Sheepshanks said:

danny tattersall said:

The question is, can he legitimately claim back his expenses for 'living away from home' via his Limited Company?

So, he's an employee and his employer is instructing him to stay in a certain place, whch isn't his home address, and covering his costs as expenses - what's wrong with that?

I don’t think his employer is instructing him to stay anywhere. The way I read it he moves around the country doing various jobs, and he’s claiming all his accommodation, vehicle, and food costs as “business expenses”. That’s what most “Contractors” do.

[Sheepshanks]

Countdown said:

I don’t think his employer is instructing him to stay anywhere. The way I read it he moves around the country doing various jobs, and he’s claiming all his accommodation, vehicle, and food costs as “business expenses”. That’s what most “Contractors” do.

If he's set up a limited company, as the OP said, then he's an employee of that company, His company is the contractor.

[Countdown]

Sheepshanks said:

If he's set up a limited company, as the OP said, then he's an employee of that company, His company is the contractor.

Ah ok- I misunderstood;)

[anonymous-user]

He might not be an employee of the ltd. He probably is, but it isn’t compulsory to be on payroll.

Considerations on this include, as OP says, if any element of the costs paid should be BIK. As well as his personal tax situation, the company needs to treat things properly from a tax / VAT perspective too. It would easy to get into an argument with HMRC about it if there was ever an investigation