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Getting Your Business to Pay for Your Holiday!
Newsletter issue - August 08.
It's the holiday season and you may be tempted to get your limited company to pay for some or all of your holiday costs. If you do this you will normally be taxed on the entire cost, but exactly when you pay the tax depends on how the holiday was arranged.
If your company contracted with the travel agent, airline or hotel to provide tickets and accommodation, the cost is not immediately taxable on you. But where the trip had no business function the cost must be included on the annual form P11D and you will pay the tax due in the following tax year, or the next one. The company has to pay class 1A national insurance at 12.8% on the value of benefits declared on the form P11D, but you as the employee do not have to pay NI on the cost.
Alternatively you may have arranged the holiday yourself and then your company picks up the bill. In this case the cost of the holiday should be treated as extra salary at the time the company pays the bill, so effectively the cost is put through the payroll, incurring both employers and employees NI.
It is possible that some part of your trip is business related. Perhaps you have a customer in Switzerland you need to visit. If your company pays for you and your spouse to spend a week in Switzerland the total cost of the trip must be apportioned according to the business and private elements. You should record who attended the business meetings, on what days they were held, and any associated costs such as local travel, and meals. If your spouse was not involved in the business meetings, their air fare and accommodation is not a business expense, so must be declared on your P11D, or on their own P11D if they are also an employee of your company.
The tax rules are different for companies and for unincorporated businesses. When you work as a sole-trader or in a partnership, there is no employers' national insurance due when the business pays for the owner's private expenses such as a holiday. The private element of the trip is treated as part of the business owner's profit for the period and will be subject to income tax and class 4 NI, just like the rest of the profits made in the period.
What our clients say about us...
"Paul has provided accountancy services to my company for 2 years now. I can recommend Paul very highly; his skills as an accountant are highly detailed and professional and he is always available to provide advice. One aspect of the way Paul works that I greatly appreciate is a preference to meet face to face when there is a detailed conversation to be had. I personally find this more productive and is a benefit of working with a small accountancy firm that you wouldn't get with the large faceless providers."
ALISTAIR FAIRWEATHER - PROGRAMME & PROJECT MANAGER, DELIVERING/RESCUING I.T. 7 BUSINESS CHANGE WITH BUDGETS UPTO £50M INC SUPPIER MANAGEMENT
"I couldn't ask for more from Paul as an Accountant. Paul has been accountant to Work Relief Charity Recruitment for just over a year now and is proving an invaluable asset. Accurate, knowledgeable, flexible with an emphasis on service delivery, I would recommend Paul's services to any organisation looking for an accounts professional."
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Lee Westrap MBCS - Director - Bulldog IT Services
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