First of all, what do you need to think about if you are going to be taking a contract abroad? Can you claim for your costs as business expenses, and if the answer here is yes, what can you claim? Any such costs could add up when working abroad, and it is good to know what you can claim for. In this article, I will go over the rules that cover this and what you need to think about here.
In a worldwide economy, many projects will exist with working team members spread across the globe. Along with this come a chance for you to work overseas through your business. In doing so, you can then experience different tastes and new cultures.
If you land a contract in a foreign country, you are going to jump on a plane. When you get there, you are going to meet up with an overseas client face to face.
The rules for claiming expenses
As a business owner, you should be familiar with the rules when it comes to claiming an expense back home in the UK. These are as follows:
- It must be `wholly, exclusively and necessary’ for your business; and
- You should obtain and retain receipts just in case the taxman ever asks to see these in the future
The types of costs that you can claim will be your flights, accommodation costs, business travel getting around, meal costs. There are also benchmark rates available (see below). In addition, you can also claim for Personal Incidental Expenses (PIEs) at £10 per night when you work abroad.
I also have a separate guide that covers relocation costs -this covers where you are actually moving your primary place of residence.
Contracting and working abroad
First of all, when you are working abroad, the same principles apply as above. Therefore, when you incur any expenses, it is key that they are `wholly, exclusively, and necessary.’ Also, you always need to ask for a receipt when you pay for an expense. Receipts should be kept with your business records.
What’s more, while you are away you can experience the different food and drinks. Please note, though, the taxman is on the lookout for any expenses that are not exclusively for your business. The taxman is even more so than with your UK expenses.
Please note where there is a duality of purpose, a cost is not an allowable one. `Duality of purpose’ means there is a mix of business and personal element to a claim, and as such, you cannot claim for this.
What should you bear in mind
First of all, I would not advise you to mix business trips with holidays. If a contractor delays his return home to spend a few days on the beach or spend time sightseeing, then he cannot reclaim any of the costs as a business expense. Likewise, if the contractor takes his wife and she spends her time in the hotel spa while the contractor is meeting with the client again, he cannot claim the cost as a business expense as `duality of purpose’ has been established.
The best method that you can use to avoid any confusion is to book the business and personal related expenses one by one. If the contractor books the outward and return flights apart and the business and personal elements of the hotel stay apart, he can claim for the outward flight and hotel stay that relates to the business element and pay for the other costs himself. Likewise, if the contractor books his trip, and his wife books hers separate from her husband’s, the contractor can claim for his expenses.
Please take account of the above as these are key when claiming for such costs.
Indeed, this may all seem quite over the top. However, these are HM Revenue & Customs’ (HMRC) rules. When you have a receipt or invoice that includes spending for a personal benefit, you cannot claim for it.
Further things to think about
Key to note, when you incur expenses while working abroad, please treat the foreign costs just like you would when you spend back in the UK.
Please keep the receipts and claim the whole amount back.
Further to the above, HMRC will approve certain business expenses when it is clear that it was for a business purpose. Indeed, this will be a purpose that motivates the expense and no other clear purposes. Where there is a minor amount of personal element to a business trip such as sightseeing in their spare time, HMRC would be unlikely to dispute a claim. HMRC will challenge expenses when they have a reason to believe an expense has a dual purpose; therefore, please be careful.
HMRC’s benchmark rates
HMRC also has benchmark rates for most countries, and this includes all major cities. It is important to note that these benchmark rates are not fixed-rate allowances. You can only claim the amounts that are set by HMRC if you incur expenses up to those amounts.
You can view the worldwide benchmark rates can be viewed at the link for the page below:
The two year rule
You should also note too that the usual two year / 40% rules apply when contracting abroad. Just like they do when you are working in the UK. Under this rule, you should not expect to be travelling to a worksite for longer than 24 months. This rule is providing you spend more than 40% of your working time at the site.
When you are working abroad, you can take advantage of the lower prices for goods. That being as long as you pay the correct taxes. The goods will include things such as laptops or other pieces of equipment. Please note, most foreign countries have facilities for people who travel to reclaim the sales tax. They can do this either when they buy the goods or when they leave the country. Therefore, you declare the asset when you return to the UK and pay any applicable VAT. If you are VAT registered and you are operating under the normal VAT scheme you can claim this VAT back on your next VAT return.
Link to Contractor Advice UK group on