Re: "They" won't accept it as a business expense
- From: "Simon" <another@xxxxxxxxxxxx>
- Date: Sun, 9 Apr 2006 19:23:00 +0100
<alexrpeters@xxxxxxxxxxx> wrote in message
news:1144603909.663150.271130@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
I have a few question regarding business expenses. Say the company
director of CARSERVICES Ltd decides he wants stop doing car repairs and
go into the hotel refurbishment business and this is allowed under the
articles of association. The director decides he wants to do a little
research first so he decides that he is going to stay in all the top
hotels of the world. Obviously his wife will need to go with him to
assist in taking photographs. And little Peter and Jane can't be left
home alone so they tag along. First class seats all around.
After three months the company director decides nah, he doesn't want to
do hotels, he wants to stay in cars. But he duly presents his airline
receipts, hotel receipts, taxi receipts, restaurants receipts and all
the other expenses to his accountant and writes off most of the profits
from CARSERVICES Ltd and doesn't pay as much corporation tax next year.
I've been told this can't be done but no-one has given a concrete
reason why. Apparently "they" won't like it. By "they" I presume these
are Inland Revenue officers. Now as long as the company director can
prove that he was legitimately doing research and not looking for a
freebie holiday what can they do? He changed his mind after three
months and who can say otherwise? Or what if the director buys a few
books about hotel refurbishment and decides he wants to write them off
as a business expense?
And I've never heard of the Inland Revenue interrogating the company
director over every single invoice and receipt and demanding
explanations. I know people who have been in business for 20 years and
have never had so much as a letter from the VAT office.
Is it true that "they" can open your books and demand that you account
for every little item, right down to a book of postage stamps that you
"accidentally" took home instead of leaving it at work up to 6 years
ago? And even if they can, surely the onus is on them to prove that you
are lying about stealing stamps from work or taking a £20,000 holiday?
The taxman wrote
Oh dear your guy is in trouble isn't he.
It sounds to me that your client has met an Employer Compliance Officer.
For an expense to be allowable, it has to be incurred "Wholly, Exclusively
and Neccessarily in the duties of the employment. It might, and thats not
certain, be allowable for the director to incur some research expenditure,
but only it can be demonstrated that the costs were incurred in a legitimate
business event. The wife and kids are not employees of the business and any
expense incurred on there behalf is taxable as if it was paid to the
director.
First Class or Cattle Class is irrelavant.
An EC officer can look at the last 6 closed years unless he has reason to
believe that there has been a deliberate attempt to avoid paying the correct
tax, and then he can go back 20 years.
Simon
.
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