We live in a global economy, and many projects now comprise team members spread throughout the globe. This presents great opportunities to expand your business overseas and at the same time sample new vistas and cultures.
Sometimes landing a deal overseas will involve hopping on a plane and meeting the client face to face. In most cases, business owners will already be adept at claiming domestic expenses, such as private car mileage etc.
However, working abroad has a few things you need to be aware of in relation to claiming expenses.
One rule that always applies
HMRC’s golden rule for claiming business expenses wherever you are working worldwide is that they must be “wholly and exclusively” be needed for business purposes.
The requirement to keep proof of expenditure again applies worldwide, so you need to ask for taxi receipts for example, just as you would when working in the UK.
Whilst working abroad is a great way to gain new experiences and perhaps taste new food and drink, the tax man is always on the lookout for expenses that are not wholly of a business nature – even more so than when working in the UK.
Don’t mix business trips with holidays
Where you establish duality of purpose in travel, then the costs are disallowable. So for example if an engineer delays his return flight home to take in a visit to some areas of famed local architecture, then he cant reclaim any of the trip as a business business.
Likewise, a project managers spouse who intends spending some time in the hotel spa whilst their other half is visiting the client – then again immediately the trip is not reclaimable as duality of purpose has been established.
The best way to avoid confusion – and still mix business with pleasure
In the cases above, if the engineer had decided to book the outward and return tickets separately, and then the conference hotel and planned leisure days again as two separate bookings, he could then claim for the outward flight and the conference accommodation, and pay for the rest out of his own pocket.
Likewise, the spouse’s trip above would need to be booked entirely separately, and paid for from their own funds.
This all may sound like overkill, but those are HMRC’s rules – if an invoice, bill or receipt has spending for personal benefit on it, you can’t claim it back.
When you incur expenses abroad, you can treat foreign expenses exactly as you’d treat domestic spending – i.e. keep the receipt and claim the whole amount back.
In the unfortunate event that you lose your receipts (or just want to keep things simple by going for benchmark figures) then taxman has a list of subsistence rates for most countries, including major cities. It’s important to note these rates aren’t allowances – you can only claim the amounts prescribed by HMRC if you actually incur expenses up to that amount.
Currency fluctuations mean that a taxi ride at €50 may cost you £36 when you make the journey, but may be £37 which it comes out of your account.
The AccountsNet portal allows flexible multi currency reimbursements, but if in doubt, always claim the amount that has left your bank.
You can take advantage of lower prices abroad to purchase assets for your business as long as you pay the correct taxes.
Most countries have facilities to help travelers reclaim sales tax, either when they leave the country or when they buy. If you purchase a business asset – e.g. a laptop or some other sizable piece of equipment – you can reclaim the sales tax.
You’ll need to declare the asset when you return to the UK and pay any applicable VAT, but if you’re Standard VAT registered then you can reclaim the VAT back on your next return.