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How to mix business and leisure and stay on the right side of HMRC

Once upon a time business trips were all about getting there and back again as soon as possible, but with technology and travel making it easier than ever before to explore the world, many are opting to mix business and leisure in a new pursuit some have dubbed ‘bleisure’.

A study by Expedia Media Solutions found that 43% of all business trips, made both at home and abroad, were extended to include some kind of leisure activity, while one in three business travellers had taken a friend or partner along with them.

Of course, few would pass up the opportunity to do some sightseeing if they have to be in the area anyway, but mixing business and pleasure brings into play HMRC’s ‘duality’ legislation, which makes it difficult to figure out allowable expenses. So, what can be claimed when there are so many variables at hand?

“The original purpose of the trip is the important thing here,” says Lucy Cohen, commercial director of SME accountancy firm Mazuma. “HMRC’s stance is that to claim tax relief on business expenses they ‘must be incurred wholly, exclusively and necessarily in the performance of your duties’, so you can’t claim expenses for poolside cocktails at your hotel, even if you have just come from a business meeting.”

 
However, she says, that’s not to say you have to stay cooped up in your room until your flight, nor that some costs aren’t tax deductible.

“The key is avoiding falling foul of HMRC’s ‘duality’ clause, which forbids business expenses having a dual purpose. As long as you gain no personal benefit from the expense, it will be considered a legitimate business expense.”

Katie Wilkins owns a small interior design business in Bradford. Her job means she frequently travels to cities throughout Europe, and has become a pro at managing her expenses in a way that allows her to see the sights while she’s working.

“If I’m adding a couple of days to my trip for pleasure, I book my flights there and back separately. The outbound flight is tax deductible – I’ve got to get there, after all – as is the cost of necessary accommodation around the business event. Any additional nights I stay, plus the plane ticket home, is paid for out of my own pocket. Necessary subsistence and costs such as getting to and from a meeting are deductible – that’s all business. A leisurely coffee in a sunny piazza is solely for my benefit, so that’s not, unfortunately.

“I just ask myself, ‘Do I need to be doing this for work?’ If the answer is no, then it can’t be expensed.”

Katie has also taken her partner along with her on occasion, but advises paying extra attention to your expenses in this instance. “Obviously their expenses are not deductible, unless they’re part of the business or you’re unfit to travel alone and need assistance. So the cost of their transport isn’t deductible. When it comes to dining together, get a breakdown of the bill – you can only expense your portion. As for accommodation, HMRC will ignore the wholly, exclusively and necessarily rule where expenses overlap. So if you’re already paying for a room for business travel purposes, it doesn’t matter if they share it with you. There’s no extra cost involved so the whole cost of the room is deductible.”

But be realistic with the hotel you choose. If travelling with a partner means you choose a lavish couple’s suite over a standard business traveller’s room, then that’s a personal benefit and therefore not an allowable expense. “If we really want to make a trip of it,” Katie says, “then we stay in basic accommodation as necessary for the business portion of the trip, and then we move somewhere else afterwards.”

A final word of advice from Lucy: “Combining business and leisure is fine if you’re mindful of your expenses. But to keep HMRC happy the primary objective should always be ‘business first’.”

 

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Miles Hobson

Miles Hobson

Miles oversees marketing communications at FairFX. He has a passion for travel and loves to explore new cities on foot to find their hidden gems.

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