Sole trader travel costs

payrollpro

I know the answer to this one but I'm posting it to see if I might have missed something.

Client is a sole trader, works out of business premises and, obviously, travels there each working day to perform the work. We have pointed out that such costs are disallowed as they put her in a position to perform the work and are not part and parcel of the trade itself but she, understandably, is not happy.

According to her the previous accountant allowed such expenses without comment and she is now wondering who is right. We have been through SA103F and pages SEFN9 and to us it is painfully clear but I don't want to disappoint her.

So, apart from the obvious confirmation that the disallowance approach is right, my main question is, how do others deal with similar circumstances? You take on the client and find, as with this one, your predecesor allowed costs which you don't consider are right.

Payrollpro

Monsoon

It's a tricky one.

I would first explore the possibility that her main place of work is home, if any substantial amount of work or type of work is carried out there. This will of course depend on the facts of the case and the type of trade.

Once that is decided, in some respects it comes down to calibre of client. Some clients will be horrified that they've been getting it wrong for so many years, others will be annoyed at you and demand you put it through. Then there will be the people in the middle.

Luckily this doesn't come up that often for me, but I would be inclined to state my position, point them to the particular entry that supports your conclusion, and leave it up to them.

It's always annoying to lose a client, but you have to take the view that if they leave you due to something like this, they possibly weren't the type of client you wanted anyway.

I will always play up the areas where I have saved tax (especially vs prior years).

Ultimately it's down to the client's individual perception; you can't please all people all of the time.

T.C.

Exactly, you can always please the client!! I took on a new client recently. His old accountant was allowing him to put through half of his grocery bills each week! The logic in that was that he sometimes stayed over at the business premises for security (I doubt that). He was too impressed when I said that I could not put this through, but I think he has accepted it ok. However, as Monsoon says "you can't please all of the people all of the time". You have to do what is right.

PGM

T.C. wrote: »

Exactly, you can always please the client!! I took on a new client recently. His old accountant was allowing him to put through half of his grocery bills each week! The logic in that was that he sometimes stayed over at the business premises for security (I doubt that). He was too impressed when I said that I could not put this through, but I think he has accepted it ok. However, as Monsoon says "you can't please all of the people all of the time". You have to do what is right.

But how many times have you heard someone say "I've got a great accountant, I hardly pay any tax"

They could be good, they could be bad

T.C.

Oh yes, I like that comment!!!!

Monsoon

Even better "my mate down the pub does his own tax returns and he don't pay no tax at all"

payrollpro

Monsoon,

None of the work is done at home, it's spa treatments and therapy and she rents the premises from a hotel on the basis that she benefits from the captive audience of guests and they get the space working for them without having to deal directly. Apart from a bit of paperwork, goes for anyone, none of the trade is home based.

So the answer seems to be in the manner in which we approach the client, smilingly persuasive eh? It also looks like we need to find some tax saving method which the previous accountant didn't think of to offset it, I think we can do that.

Payrollpro

deanshepherd

Interesting.

Just because all the work is carried out at the Hotel premises it does not necessarily follow that the business is based there.

A key tax case considered that of a tradesman who carried out all his work on site. Obviously he never conducted any work from home other than taking a few phone calls and some minor bookkeeping duties. The fact that he kept his tools at home (as it would be inappropriate to leave them on site) and had his home address and telephone number on his invoices was sufficient to persuade the court that his business was based at home and not on his client's premises.

I would be looking at similarities between that case and your clients to see whether a robust enough argument could be built. Hard to tell without knowing who gets billed (hotel or end client), who appears outwardly to be providing the service (hotel or your client), whether she provides services elsewhere (other hotels or on a mobile basis), who provides equipment and where it is all kept.

I have a masseur client who works from the same premises but we find her situation very akin to that of the tradesman so are quite happy to claim all the travel expenses.

That said, my gut instinct is that you are absolutely right to disallow!