When does a business expense become a benefit in kind?

numbers

Q. When does a business expense become a benefit in kind in the eyes of the taxman?

What I mean is, if I take a customer out, the meal, drinks, club entry, taxis home etc are a legitimate business expense and so they go on the expenses. What if the club requires an annual membership fee, would that be classified as a legitimate expense or a benefit in kind? Or what about sporting club membership to allow someone to take customers there for lunch?

I am just trying to figure out, from the taxmans viewpoint, what crosses the line from legitimate expense to BIK and if there are any guidelines?

numbers

numbers

jimmo,

The circumstances are as follows. All expenses are paid by self and then claimed back in full from employer who reimburses with monthly cheque, so it is not income so no tax implications for me. I just wondered if at any point the taxman would step in and dictate that something going through as an expense was in fact a benefit in kind? The best example I can think of is the likes of personal membership to private clubs such as sports clubs, golf clubs, etc. If the employer is happy to allow the employee to claim the full cost of personal membership via a receipted expense claim, is the taxman perfectly happy?

From what you say, if it is a business expense and the employer is happy to pay it, then the employer takes the tax hit and if it's a BIK the employee takes the tax hit, so as long as the taxman gets their money they are happy? Is that correct?

thanks

numbers

numbers

jimmo wrote: »

When your employer pays you the monthly cheque he is reimbursing you your claimed expenses. Because it is a reimbursement, the payments do not have to go through payroll and are not taxed. However they have to be reported on form P11D.

To the best of my knowledge, mine and others P11Ds do not include reimbursed expenses, i.e. flights, accomodation, hire cars, meals, etc.

jimmo wrote: »

You then have income over and above your salary. No tax has been deducted but it is, nevertheless, taxable but subject to your claim that you incurred the costs “Wholly, exclusively and necessarily in the performance of your duties”.

As the P11D does not include reclaimed receipted expenses, this is not the case.

jimmo wrote: »

Where the expenses are entertainment expenses there is a “disallowance”. It sounds as if your employer is taking the tax hit on the disallowance. Then, when it comes to your personal liability, your entertainment expenses are not disallowable under the entertaining rules but are still subject to the test of whether they were incurred wholly exclusively and necessarily in your job.

This must always be the case with regard to wining and dining etc of customers, as employer reimburses in full.

jimmo wrote: »

Club membership fees for an employee are, I am afraid, a whole different ball game. The usual stumbling block from your point of view is “exclusively”. There are arguments both ways but as a generalisation I would say you should expect club membership paid by your employer to be taken as a taxable benefit.

I would agree totally, it would fail the "exclusively" clause quite miserably.

thanks

numbers