Tax allowable expenses

[neilsolaris]

Hi,

I work as a musician, but also a bookkeeper, so many of my colleagues keep asking me specific questions! There are three areas where I get mixed advice, both from online, and from colleagues' accountants. I'd be grateful if you could give your expert opinions please.

Mobile phone and broadband. I grouped these together because I think they share the same dilemma. If you have a mobile deal that has a package, allowing you unlimited calls, texts, and a certain amount of data, and you use your mobile for both business and personal use, my instincts is that the expense would not be allowable for tax, because you couldn't accurately apportion the usage. But various online sites say it's reasonable to apply a business percentage to the expense. What is your opinion on that? And if you apply a percentage, how would you come up with such a figure?

The other is to do with subsistence. I know that you can claim for food in conjunction with overnight stays. And that if you are an itinerant worker, you can also claim food expenses if your work is outside your usual pattern. So firstly, would you agree that the typical freelance musician is an itinerant worker - we work all over the place, each job being a separate contract?

BIM37620 - Wholly and exclusively: duality of, or non-trade, purpose: travel costs: to and between sites - HMRC internal manual - GOV.UK

www.gov.uk

And would you also agree that they are able to claim the food expense, if outside their usual pattern of work (or if they don't have a usual place or work)?

Claiming expenses for the cost of food and drink

When you can claim tax relief on the cost of your food and drink when you're travelling for business.

www.freeagent.com

Many thanks for your help.

 

[GLAbusiness]

I assume they are self employed.

Expenses if you're self-employed

Business expenses you can claim if you're self-employed

www.gov.uk

States they can claim mobile phone bills, but implies they need to split usage between personal and business (which would be zero if it is included in the package).

 

[neilsolaris]

I assume they are self employed.

Expenses if you're self-employed

Business expenses you can claim if you're self-employed

www.gov.uk

States they can claim mobile phone bills, but implies they need to split usage between personal and business (which would be zero if it is included in the package).

Thanks for your help. Sorry I forgot to say, I was referring just to self employed musicians.

So you're of the opinion that for packages, you can't claim any business cost whatsoever? I tend to agree, it's just I've seen many accountants websites saying you can spilt it. Here's one such example.

Is my mobile phone tax deductible?

Is your mobile phone tax deductible? It depends on whether you're a sole trader, partner or limited company. We explain the rules.

www.thp.co.uk

 

[DWS]

I allow a percentage of mobile phone bills for my Sole-Trader clients, as long as it seems reasonable for the work that they do then I do not see a problem with it, and the client is aware that they may have to prove the usage if ever challenged by HMRC

 

[neilsolaris]

I allow a percentage of mobile phone bills for my Sole-Trader clients, as long as it seems reasonable for the work that they do then I do not see a problem with it, and the client is aware that they may have to prove the usage if ever challenged by HMRC

Many thanks for that, that sounds sensible to warn your clients about being prepared to prove it. Out of curiosity, what kind of business percentage would you say is reasonable for a self employed musician?

 

[DWS]

I always ask my clients to tell me what % of their monthly bill is business use and as long as it seems reasonable for the sector they are in then I include it with the proviso I said above.
I do not have any musicians as clients so couldn’t really answer you on that, I think you need to treat every one of them differently, you can’t just choose a % and use it across the board, you may have one who uses their phone regularly for business and another hardly at all that’s why you need to ask them to provide an honest estimate.

 

[GLAbusiness]

I'm not sure, but I think it may make a difference if they buy the phone and then have a sim only package. In that case maybe the phone itself is tax deductible.

 

[MyAccountantOnline]

If it's a self employed individual the expenses allowable for tax purposes are those which are incurred wholly and exclusively for business purposes. If you aren't claiming Simplified expenses (which may be an option) costs which include both private and business use are apportioned so that you claim only the amount which relates to the business. In practice I have never seen HMRC challenge this but you should keep some evidence showing how and why you've apportioned the costs.

 

[neilsolaris]

Many thanks DWS, GLA and My Accountant!