Foreign subsistence expenses: the allowances explained
Posted on 25th April 2019
With more and more companies now conducting the vast majority of their business dealings online, travelling for professional purposes is becoming less of a necessity and more of a choice.
As sophisticated advances of the internet and technology allow businesses to operate on an exclusively remote basis, choosing to provide that personal touch by hopping on a plane and meeting foreign clients in person can be a great business move.
Travelling domestically for business purposes and claiming back the expenses is a relatively straightforward process that most companies have nailed – but foreign trips have some peculiarities that are worth learning about, even if you do not currently conduct business abroad in the physical sense.
With more and more people being self-employed and working remotely, there is little to stop us from making overseas business connections and working from foreign locations. We have been living through an economic boom over the past couple of years, and global wealth is steadily increasing.
Nevertheless, with the dark clouds of Brexit looming and uncertainty about the UK’s economic status at an all-time high, it’s a better time than ever to consider conducting business overseas and making those foreign connections.
And if all else fails, at least you can say that you have travelled the world!
So how does claiming expenses from overseas business trips work?
As with domestic business travel, you must show that your reasons for the trip were wholly and exclusively for work-related purposes.
This applies to each and every country in the world, and the requirement for proof of purchase is also a global one.
We highly recommend downloading a translation app and keeping “may I have a receipt, please” as a top phrase – or at least having it written down somewhere in the relevant language to show taxi drivers, waiters and the like!
It’s true that HMRC is very strict about mixing business and pleasure overseas – and if the taxman suspects you’re benefitting from a foreign trip in more than just the business sense, your expenses can potentially be disallowed.
Of course, it is impossible to head to an unfamiliar location and not be tempted to explore famous landmarks, indulge in the local cuisine or stroll down winding streets to buy souvenirs and postcards from charming market stalls – and the taxman knows this.
As HMRC is incredibly stringent with its terms surrounding claiming overseas business expenses, it is always best to split a trip into two parts – business and leisure – if you wish to spend some downtime there.
For example, if you are heading to a conference in Lisbon, but you want to dedicate a couple of days to exploring the famous neighbourhood of Alfama and seeing landmarks such as the Torre de Belém, it is best to add these extra days either to the beginning or the end of your trip, and to pay for the outbound or return flight (as appropriate) out of your own pocket. You would also have to pay for the extra nights in accommodation yourself, as you are spending a longer time abroad than you would have done if you’d just gone for the business portion of the trip.
The same goes for travelling with a spouse or partner. While you are, of course, free to travel with a companion, their travel booking would have to be done separately. You would also need to book them in a different hotel room to your own.
All in all, if there is any spending for personal benefit on a bill, receipt or invoice from foreign travels, HMRC will render it inadmissible and you will not be able to claim on it.
Bear in mind that when working away from home, either in the UK or overseas, there is an extra personal/non-business expense you can claim, called 'incidental overnight expenses'. Examples of these types of expenses include phoning home, laundry or buying newspapers, and the allowance is £5 per night in the UK and £10 per night overseas.
What about buying food and drink when on an international business trip?
Thankfully, subsistence allowances are much more basic to grasp than the travel expenses permitted by HMRC. It is exactly the same as domestic business travel – in that you must keep a receipt or another permitted form of proof of purchase, and you can claim the entire cost back.
The subsistence rates of each country differ, however, and that’s why HMRC has included a 90-page document (updated 6 April 2019) on its website detailing the overseas scale rates of every single country on earth, as well as some major cities. You should note that you can claim the actual cost of a hotel, your food (and so on), or use the published worldwide subsistence rates - whichever is more simple for you.
To navigate the guide, simply press “Ctrl + F” on your keyboard and type in the name of the country or city you are going to be visiting for work. This will take you to the right place – no need to risk repetitive strain injury scrolling through the entire document… !
How about buying business assets abroad?
Taking advantage of lower goods prices abroad is a common move for leisure travellers. Taking an extra holdall to stock up on designer clothes or foreign booze and tobacco is a popular procedure amongst seasoned holiday goers – but did you know that you can benefit from this practice for business assets too?
If you buy an expensive piece of equipment abroad – for example a camera if you are a photographer or a new laptop for your bookkeeping business – you can reclaim the sales tax. This can be done either at the airport when you leave the country, or, in some larger stores, at a dedicated tax reclaim counter similar to the ones you see in the UK for our own foreign visitors.
As long as you declare the item when you return to the UK and pay the applicable VAT, this could potentially save your business lots of money.
Which currency should you claim expenses back in?
To make it as simple as possible, we recommend claiming back expenses in GBP, and to use the exact amount that left your bank account. You will have to provide a copy of the transactions in your bank account if your proof of purchase is not in GBP, but you can block out any unrelated transactions using an image editing software. You can, of course, claim back in EUR, USD or whichever currency it was that you paid in – but you will have to juggle exchange rates which can mean more work for you, and it may only mean saving a few pennies.
Make sure you are always up to date on the latest development with travel and subsistence expenses for domestic and international travel by signing up to receive important updates here. If you need tailored advice about claiming back your expenses, or would like help with your bookkeeping, we would love to help. Why not book a call with us or drop us an email? We look forward to hearing from you!
Nicola J Sorrell -
Founder | Xero Champion | IR35 Expert
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