The generally held interpretation of the rules regarding travelling expenses is very briefly summarised below. If an individual takes a one year contract directly under PAYE his travelling to the employers office is private as it is a home to work journey. If that same individual works for his own company the office is a temporary assignment and therefore, because it is expected to last for less than two years, it is business travel and tax deductible. The crucial difference is that the contractor is an employee of his "one man company" and he will expect to be posted to another assignment after this one concludes.
A further caveat applies where the new assignment is in substantially the same place as the old. Rules introduced to prevent general avoidance of the spirit of the legislation would render the journey as home to office and therefore not allowable for tax purposes. HMRC suggest this will apply to assignments within the Square Mile of the City of London. Even so it is possible that the first two years may still qualify depending on the circumstances, particularly the nature of the contracts during that period.
A major decision is whether the company should purchase a car and the director accepts the income tax charge this creates or whether the director should use his own car and claim FPCS mileage allowance. We generally recommend claiming business mileage.
The approved rates are 45p per mile for the first 10000 miles and 25p thereafter.
Where business mileage is claimed this covers all the costs of buying and running a car so the company will not therefore pay any further motor costs such as tax, insurance or repairs.
A middle course depending on the size and age of the car is sometime to run the car on the company except for fuel and then to claim the lower rates of mileage allowance.
All monies paid for overnight accommodation whilst working away is allowable in addition to the cost of a meal, subject to a maximum of £15 per night.
If your business trip keeps you away from home beyond 8pm the company may incur the cost of a meal subject to a maximum of £15 per night .
Where you travel to a customer's premises without staying overnight a daily allowance is available as follows:
- Where you are out of your home for more than 5 hours per day a daily allowance of £5.
- Where you are out of your home for more than 10 hours per day a daily allowance of £10
The above allowances can only be claimed if you are actually incurring a cost after the time you leave for work.
If you have any queries about any aspect of business travel expenses or are interested in hearing more about how CTS can help your business, please contact Jon Dale on 01743 235 236 or email firstname.lastname@example.org.