Making sure travel costs don't take off
Conference Travel Expenses
The next time you have an overseas conference to attend why not link it with a holiday - and try and get part of the cost as a tax deduction?
Many consultants go on an overseas conference but fail to spot the opportunity of getting the taxman to subsidise the cost of their holiday. Of course, this does not mean booking a Four Seasons hotel and expecting to get your family's summer vacation allowed as a tax deduction.
What it does mean is by doing some advance planning and combining your holiday with an overseas conference, you should be able to get some of the cost - including the airfare - as an allowable expense.
You have to be very careful when including conference costs in your tax return as usually the expense is fairly high and nonrecurring. It will therefore show up as a large sum and it has to be justified. You might wish to show this on the additional information box on your tax return.
However, it is better to do some advance planning and set an itinerary of some sort. It doesn't have to be too sophisticated but there has to be a link to your practice in terms of the subject matter covered by the conference.
Essentially, you will have to do an apportionment exercise, so let me point out some of the pitfalls:
The statutory test
Although the test is that the expense must be incurred wholly and exclusively for the purposes of a trade or profession, there is nothing in the Taxes Act about apportioning expenditure.
The Inland Revenue's own internal manuals actively encourage apportionment and cite examples of apportioning an expense between business and private use.
Practical examples
Consultants should learn the lessons of the tax case of Bowden v Russell and Russell in which a solicitor visited North America partly as holiday and partly to attend two professional conferences, mainly on foreign law.
He claimed the expenses of the visit, excluding those relating to his wife, as a tax deduction and the taxman disallowed them.
On appeal he lost his claim on the basis that as the expenses were admitted to be for a dual purpose of a holiday and to attend the conferences they were not wholly and exclusively for the purpose of the solicitor's business.
There were two particular facts that counted against the solicitor in this case:
- The subject matter of the two conferences was remote from the work of the solicitor's firm - it was about foreign law, whereas the work of his firm was only concerned with UK law.
- The purpose of the trip was too weighted towards the holiday element and fell foul of the dual-purpose rule.
This judgement might appear harsh but it illustrates the need to overcome the dual purpose rule.
In another case one of the judges quoted the example of a doctor who went to look after a sick friend who lived in the south of France. The judge considered that because the purpose of his trip was wholly and exclusively a business one, the travel expenses would be allowable.
Purpose
The examples illustrate the importance of purpose. In short, if you can demonstrate a business purpose, the expenses should be tax deductible - however pleasant the location.
TIPS ON TRAVEL
- Keep a log of places visited
- Remember the taxman likes to see contemporaneous notes
- Justify business purpose
- Have a distinct link between the subject matter covered by the conference and your area of expertise
- Try not to be too greedy - you risk losing all
- Don't claim expenses of spouse or partner unless they work for you in your practice
Willie MacKenzie is a chartered accountant and tax adviser specialising in hospital consultants. He can be contacted on 01483 419922, by email at wtm@accmac.plus.com or visit www.wesaveutax
