Expenses of the business that have been paid for personally may either be reimbursed by the company or, if not reimbursed, may be deductible for the individual against other income.

Subsistence & entertaining

Subsistence

If you are carrying out your director duties such as attending a client meeting or traveling for business, you can claim your meals and drinks back via expenses tax free provided receipts are retained.

Say you are attending a client meeting; you could claim back your lunch whilst in the city centre or claim back a coffee on your way to a supplier meeting. Another example is you might buy your evening meal at a service station on your way back from a client meeting as it will be too late to eat when you arrive home.

Incidental overnight expenditure

If you are travelling on business and are required to stay overnight, you can claim £5 in the UK or £10 overseas per night for incidental travel costs without any receipts.

As an example, this may be a newspaper, refreshments from the mini bar, laundry, home phone calls, tip for a taxi driver or porter.

The limits must include VAT paid. If you exceed this limit per night, the whole amount becomes taxable as employment income rather than the excess over £5 or £10.

Entertaining

When you are entertaining a client, your business can cover the cost of entertaining provided it is reasonable and for business purposes. This may include lunch or dinner, drinks including alcoholic or attendance of a sporting event such as a football or tennis match.

This may be to thank them for their business, to discuss a new deal or to promote a better working relationship.

You can also use this as a way of extract value personally from the business. You could take a customer to a restaurant you have always wanted to try or a sporting event for your favourite football team.

Unfortunately, the company is unable to claim client entertaining as an expense against their profits and no VAT can be reclaimed for these costs.

You may be considering paying for a corporate box at a football stadium or the like. The treatment of them is different depending on how you use them and who uses them.

If you take a client to the corporate box, the normal rules apply so the cost cannot be deducted from your business profits and no VAT can be recoverable. However, it wouldn’t be a taxable benefit for you as a director as you are entertaining a client as part of your duties.

You could also consider taking a group of employees to the box to entertain a group of clients as this would be tax free provided it is required as part of their employment duties.

If you used the box to entertain your staff or you went to the box with a group of friends, it would be a taxable benefit on you and your employees. Income tax and National Insurance would be payable on the benefit.

Music, audio books & Amazon Prime subscriptions

If you are currently paying for a music, audio book or Amazon Prime subscription, you should consider putting the cost of these subscriptions through the business.

HMRC will only allow the business to claim a Corporation Tax deduction for these costs if they are only used for business purposes. It would also be tax free for you and your employees.

A key point to note is that you will be required to register for a Music Licence if you are playing music in your office even if it is on headphones.

Examples

You have a subscription to Audible which you use only to listen to books about your industry and books which cover business strategy, planning and other related content. You could claim this cost from the business.

You have a Spotify licence which you use to play music in the office and when staff are working from home.

Your team have put together playlists which reflect the business values. They listen to them at home and in the office to remind them of the business values and create unity.

You could also claim this cost from the business. You have an Amazon Prime account which you use to buy items for the business such as computer equipment, stationary etc. You could also claim this cost from the business.

Points rewards cards

If you or an employee has a personal card that you use for business expenses, any points received from the reward card are not taxable on you. A good example of this is air miles cards where significant airmiles can be accumulated leading to big discounts on flights.

Similarly, a company card that receives points (such as airmiles) can be used by the business owner to accumulate points and pay for flights without any tax or NIC on the individual.

For an example see: www.americanexpress.com/uk/business/corporate-cards

School & universities fees planning

You may pay substantial amounts in education costs, in terms of school or university fees for your family. In the correct circumstances, this can represent an area where forward planning can help create significant tax savings.

When funding private education, you will expend significant amounts of income for the benefit of another individual, after it has been taxed on you. Where the income is instead taxable on those in education, the arrangement can be much more efficient. Substantial tax savings can arise, due to the personal allowance and basic rate band, which are typically unused by children in education.

However, where the beneficiaries are minors the gift must not be made by the parents, as it would be rendered ineffective for tax purposes under the “parental settlement rules”. Instead the settlement should be made by grandparents/other family members.

Tax planning

Suitable relatives will not always own income producing assets themselves. However, if they have sufficient wealth they could acquire suitable assets, such as property or shares.

Structuring the acquisition as an “income only” entitlement, for example, in another family member’s business or investment portfolio, can be an effective way to reduce the cost.

Although gifts can often be made to the children outright, it is usually preferable to gift assets into a trust for educational purposes. This route would allow you to retain control as trustee (or via a letter of wishes), while the income tax advantages would still be available in the correct circumstances.

32 Ways To Save Tax and Extract Maximum Value From Your Business

These tips are from our eBook, 32 Ways To Save Tax and Extract Maximum Value From Your Business. This guide explores 32 ways to ensure you’re maximising every opportunity you could be, to improve your life, your families and your employees.

Download 32 Ways To Save Tax and Extract Maximum Value From Your Business eBook.