I have a client who lives in South Manchester and an employee who lives in the Manchester area. They don’t have an office. Every week they meet for a meeting and have lunch which the company pays for. I think this would be classed as travel as they are working in a place that is not their usual place of work. I just want to check this is right- as the alternative would be staff entertaining and would be constrained by the £150/head limit.
In short, this is unlikely to fall within the travel and subsistence rules. For travel (and associated subsistence) to be tax-free under ITEPA 2003, the employee must be travelling to a temporary workplace. Where an employee does not have an office and works from home, their home is generally treated as their permanent workplace.
In this case, the key factor is the regular weekly meetings. Where an employee attends the same location on a regular and ongoing basis, HMRC would typically regard that location as a permanent workplace due to regular attendance. As a result, the travel to that location would not qualify as business travel, and any associated subsistence (including meals) would not be eligible for tax relief.
Even if the meeting locations vary, the predictable and frequent (weekly) pattern of attendance would make it difficult to argue that each location is a temporary workplace.
Turning to the cost of the lunches, these would not fall within the £150 per head exemption for staff entertaining (ITEPA 2003 s264), as that exemption applies only to annual events, not to recurring weekly meetings.
Accordingly, HMRC would generally treat the cost of the meals as a taxable benefit in kind, as there is no applicable exemption once the travel rules are not met.
From a practical perspective, the company could either:
Overall, while the meetings themselves are clearly business-related, the regularity of the arrangement means the associated travel and subsistence are unlikely to qualify for tax-free treatment.
My client is a one person consultant company who has fallen out with her main customer. That customer has agreed - without admitting any liability - to pay £17,500 to my client's consultancy company "by way of compensation for the termination of the engagement (Termination Payment)." Because there is no admission of liability, the payment is being referred to as ex-gratia, though the Settlement agreement doesn't use that phrase.
My query is whether this receipt is vatable?
I assume that, as the payment is in connection with a trading agreement, that it will be subject to corporation tax. However, (as would be typical for a one person consultancy company), the contract amounts to over 90% of the company's income, so I wondered if the Exception here could apply BIM40120 - Specific receipts: compensation and damages: intangible assets - HMRC internal manual - GOV.UK and if that may make it exempt from tax or if there is anything else which could mean such a compensation payment would not be taxable?
You are quite correct that the default position is that when an agreement is cancelled and compensation is paid it would be revenue as per BIM40120. Where the contract represents such a large amount of the business that the business basically ceases it can be considered as capital as per the examples on BIM35530. If it is capital there is a good chance that it will be tax free as it will involve the giving up of intangible rights (likely the right to sue) for an amount less than £500,000 as per CG13020.
Termination payments are generally subject to VAT from 1 April 2022, following HMRC's revised policy that treats early termination fees as further consideration for the underlying contracted supply. This represents a significant change from the previous position where such payments were typically considered outside the scope of VAT as compensation or damages. The new treatment means that if the original supply was subject to VAT, then any termination payment will also be subject to VAT at the same rate, and this is covered within HMRC’s revenue and customs brief 2/2022 early termination fees and compensation payments, and I have attached a link below for your information.
Revenue and Customs Brief 2 (2022): VAT early termination fees and compensation payments"
My client owns a commercial building in London.
Last year he was given the opportunity to buy a residential property next door, which he saw as a good investment and he bought it in a separate company and paid residential SDLT on the purchase. The property was not tenanted but he intended to find new tenants.
Unfortunately, it turns out that there is significant noise from the commercial building into the residential property and he is struggling to rent it out in its current state. The commercial building is due to be renovated and at that time they can deal with the noise transference issues. However that might take 2-3 years and in the meantime, he is concerned that it will sit empty. He is also concerned that he paid the residential rates of SDLT in good faith and he now does not want that to be challenged, but it being empty or used for other purposes in the interim. Please can you therefore advise as follows:
Both under b or c there would be no need to do any office conversions – it would be just people putting a desk in the existing space.
Is there anything else you can think of that would be permitted?
If there is nothing he can do, what are the consequences of paying the residential rates of SDLT, if any?
"The SDLT status of a property is based on its condition and suitability for use at the time of purchase. The property would be regarded as still "residential" if the last use by the previous owner was residential (a dwelling) and so it would be correct to have applied the residential rates at that time, despite the problems with "noise pollution" etc affecting the ability to attract tenants.
Where a company acquires a residential property for more-than £500,000, a flat "higher-rate" of SDLT at 17% potentially applies based on the full price paid, rather than the usual, lower rates and bands that apply to non-company etc purchases. There is relief from this higher rate if a property is acquired with the intention of being let out commercially (SDLTM09555) which would apply in your client's case, despite the property not actually being let yet - given the problems letting with the presence of noise pollution.
The relief can be withdrawn if, within 3 years of purchase, the property ceases to be held for the purposes of a relief. Where a property is not actually let, it will still qualify for relief if the intention remains to let it (without "undue delay"), and the delay is due to works etc to the property. Certainly, attempts at any form of letting where possible before any works commence, or between active works, would help to strengthen a claim for relief but would not be necessary where the works themselves prevent such letting (SDLTM09660)."
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