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Overseas Expenses

• 1. Expenditure on food and drink in the UK is not an allowable deduction from taxable earnings for income tax purposes as it does not meet the requirement that it has been incurred wholly and exclusively in connection with the business.  (There is a dual purpose in that one must eat to survive).  HMRC, by concession, will normally allow the cost of an evening meal, if it is accompanied by an overnight stay in the UK, while on a freelance engagement.
  
  However, there is a statement of practice (SP) issued by the Inland Revenue, SPA16 which allows the whole of the cost of living expenses including accommodation, food and drink from taxable earnings which has been incurred while abroad on business purposes.  Private expenditure, for example, on holidays taken in the course of a business trip will not be allowed.

• 2. Valued Added Tax (VAT) on overseas expenditure.  The possibility of recovering VAT incurred on expenses in other European Community countries is often overlooked.  In accordance with the EC 8th directive, a VAT registered business in one EC country can make claims for VAT incurred elsewhere within the EC.  The following are required in order to make a claim:-
• a) A claim form completed in the language of the country where the expenses were incurred.
• b) A certificate confirming VAT registration in the European country of the claimant.
• c) Original invoices.
• d) The claim must be made within six months of the calendar year in which the expenses were incurred.  Unfortunately, there is an inordinate delay in processing the repayments by some countries especially Italy.  Claims are to be made on firms VAT65 and VAT66 which are obtainable from Customs and Excise.

Each EC country has different rules on the type of expense on which VAT can be recovered.  It is not cost-effective to seek refunds for small amounts of overseas VAT and each country has it’s own de-minimus amounts.

This material is published for the information of clients.  It provides only an overview of the regulations in force at the date of publication and no action should be taken without consulting the detailed legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.