Do your clients mix business with pleasure?

working on holiday tax business pleasure

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How do you treat these items for tax purposes and what happens if HMRC investigates further?

Most business owners and entrepreneurs don’t mix business with pleasure.  Often, their whole life is focussed on their business.  They don’t have a business life.  Certainly not one that is separate anyway.  Even on holiday, they are firing off emails, writing reports, on the phone etc. etc. etc.

Some may take positive steps to segregate business from their private lives.  But after say a week, are they still succeeding?

So, when it comes to recording the costs, how do you identify the main purpose of a trip.  Or is there are mixture most of the time?  Is it a mixture of say 50:50 or some other ratio?

Can the VAT be reclaimed?  Is it allowable as a tax deduction?

I bet your client is clear on all that – in their mind yes, it is allowable, yes the VAT can be reclaimed and it is 100% business.

Wholly and exclusively of course.  But have they even considered it as a benefit in kind or heard of “duality of purpose”? You may well question them on it at the time, but they assure you it’s okay.

So, then they get a visit by the taxman.  Years after the event.  Or worse still, there are multiple subsequent years now to be considered.  They have forgotten your concerns and leave you to sort it all out.

It doesn’t matter which part of HMRC undertakes the review.  They will never be blinkered and will pass on any concerns to their colleagues back at the office (if they are not already on site).

So how do you go about sorting it out?

Have you considered the merits of making an unprompted disclosure at the commencement of the HMRC meeting?  With an appropriate Payment on Account of taxes.  And a schedule of dates, amounts, narrative etc.

It does pay dividends even if HMRC may not agree with you that it is unprompted.

But how do you get your client to agree to this approach in the first place?

If you need help in dealing with a HMRC meeting like this or making a disclosure on behalf of a client, I can help.

Anyone seeking help can call me on 07979 313 010 or…

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