Most business owners are now aware that they can claim their holiday, entertainment and even school fees against their business – in certain circumstances, and as long as it is done correctly.
1. If you decide to add a few extra days holiday to your business trip you can still claim the trip provided the primary purpose of the trip is a business. But remember that you can’t claim the extra cost of staying against business income.
If you bring your spouse, all you have to do is separate the cost; your spouse’s flights will be disallowed but your flight will be allowed and so on.
However, if you turn your holiday into a business trip, then you absolutely cannot claim expenses against your income. When you go on holiday and the purpose of the trip is personal but then you decide to do some business while over there, you’ve waived your right to claim any expenses. Because the purpose of the trip was personal, you can’t claim any of the cost incurred while doing business.
2. School fees, care home fees, staff holidays, and even piano lessons – can be claimed as a business expense in certain circumstances if you run your business through a limited company rather than sole trader or partnership.
If you provide your employees with vouchers that they can exchange for a holiday/tango lessons/care home fees etc., HMRC allows you to claim against that, as long as you report this cost as a benefit to your staff. So as director, you can have your company pay for your holiday, the company reports this as a benefit then pays Class 1 National Insurance on the cost and you as an employee pay tax on it. Then, the company can claim the cost of this benefit against its income. Is it worth it? Yes, because the company would have to pay higher tax on the holiday cost if it went through the payroll.
3. Entertainment i.e. drink and drink can be claimed if you have a contractual obligation to provide it. Say you’re running a training course and this includes tea, coffee, lunch etc. –you’re allowed to claim this because you’re under a contractual obligation to give the delegates food.
You are also allowed to claim £150 a year per head for staff entertainment. Even if it’s just yourself, as director of a limited company – because you (the director) are classed as an employee.
My advice is to look carefully into any cost of your business, whether you’re a sole trader or director of a limited company, because even the least likely cost might be claimed against, as long as it’s done correctly or you seek advice. And make sure you get the paperwork and evidence right. Otherwise, you might be paying more tax than you have to, allowing your business to bleed money that it perhaps can’t afford.