Can you claim Living Away From Home Allowance? LAFHA

Table of Content

• More than one employee’s incidental overnight expenses on the same bill
• What kind of startup costs can you deduct?
• Overnight allowance working away -Personal Incidental Expenses (PIEs)
• Claiming for a proportion of household expenses
• The exception: Eating on a business trip
• Expenses when working away from home Mon-Fri staying overnight
• Are parking tickets tax-deductible?
• Rent a property

LAFHA is paid in two main components, the Food Component and the Accommodation Component – however, there are also additional travel, removal and storage of household effects and connection of utilities components. Finally, if you’re in doubt during the coronavirus crisis about how much to claim when working at home as a limited company contractor or sole trader freelancer, do speak to your accountant for more detailed guidance. My opinion is that you would also be entitled to reclaim from your company your costs of working at home. Now I've never been one to claim lunchtime expenses...so no worries about that aspect... Also, you may not deduct travel expenses at a work location if it is realistically expected that you will work there for more than one year, whether or not you actually work there that long.

Therefore, you must demonstrate that you rent temporary accommodation purely for work reasons. When you claim for the property rental, utility bills and food, these are tax-deductible. Therefore, your business will save Corporation Taxon these costs. The claims will, however, be dependent on you meeting specific tests.

More than one employee’s incidental overnight expenses on the same bill

If you use your home in a meaningful way to carry out your trade, you can claim for any expenses incurred, however, you must be able to justify any claims you make. On the surface, this may seem like a paltry sum, but if you claim every month, this adds up to £312 per year. A sum which ordinarily would be subject to Corporation Tax, and then personal taxes if extracted any other way.

As a limited company contractor, making the decision to stay overnight would usually be if your contract site is too far away to travel back home from each day. However, while you may be able to claim for working away from home overnight you can also claim for the cost of staying away in other instances. This may include if you attend a training courseor business-related seminar. A special exemption provides that employers can pay for incidental overnight expenses relating to a qualifying period up to a tax-free limit, without any tax consequences for the employee. There are separate HMRC rules governing the payment of travelling expenses when employees are working away from home. You will find information on these rules in an article ‘UK business mileage allowance and mileage allowance relief’.

What kind of startup costs can you deduct?

If a contract obliges you to relocate, you need to account for the costs. You may deduct a large part of it all from tax, but that may still leave you with a hefty bill. From a hotel to a serviced apartment right through to flats you can find on Airbnb; all temporary accommodation is deemed acceptable by HMRC. Finally, please also ensure you claim for the overnight allowances known as PIEs.

If it is a company vehicle, how much you claim depends on the size of the engine. For example, for a petrol car with an engine up to 14,000, you can claim 11p per mile. Though you can claim for specialist clothing, say you need a pair of steel cap boots. You’re unlikely to wear the boots outside of company uses so these could be expensed to the company.

Overnight allowance working away -Personal Incidental Expenses (PIEs)

If it is not reported as wages to you, you cannot deduct the cost. Under this tenancy deposit scheme, the landlord must keep your deposit in a separate bank account. Additionally, under deposit protection schemes, the deposit will be refundable to you in the future when you eventually leave the property. It could be the case that you are away full time during the week. Therefore, a journey there and back each day may prove to be too much in terms of time. This could be so, especially given how busy the motorways can get during the working week.

You can do almost anything you want with your rented flat or house near the client workplace, so long as you maintain your principal residence. What’s more, you can also claim for your meals, including breakfast, dinner, and evening meals, while working away. Depending upon the type of work that you do, you may be able to claim for yourbusiness clothing.

Claiming for a proportion of household expenses

Explains the Inland Revenue expenses rules, what an Inland Revenue Dispensation agreement means, and why you cannot claim without receipts. The PIEs working away from home allowance is there to cover sundry expenses, such as coffees, phone calls home, and laundry. Please note, you do not need to get receipts for the costs that the PIEs cover. Importantly, it would be best if you aimed to get the tenancy agreement in your company’s name. Travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job. You can't deduct expenses that are lavish or extravagant, or that are for personal purposes.

For example, an employee could be working on a customer’s site for several weeks or might be posted temporarily to another company location for a short or long period. In those situations, the employee will incur expenses for meals and accommodation. Positively, if you’re operating as a sole trader, the rules are more generous than for company directors and other employees. In brief, you can claim a business proportion of many of the costs of running your home, if you work from there. By this, we mean no personal benefit derived from renting the property for your contract.

Contractors must comply with temporary workplace rules to qualify for travel and subsistence expenses plus tax deductions when travelling to clients. Contractors who have incurred expenses partly for business purposes and partly for personal reasons should be careful how they claim tax relief. When staying away on business, aside from the above allowances, the same rules apply with regards to legitimate business expenses -- so not a huge amount changes. You can deduct travel expenses paid or incurred in connection with a temporary work assignment away from home. However, you can't deduct travel expenses paid in connection with an indefinite work assignment.

However, the rules and their interpretation by HMRC can be complex, so it may be useful to take professional advice if you are uncertain about a claim. This is one of those expenses where the rule ‘wholly and exclusively for business purposes’ definitely applies. If you feel the item has a dual purpose, unfortunately, you cannot claim this back as a business expense.

Learn more about how this works in our guide to the self-employed health insurance deduction. Introduced in 2018, the Qualified Business Income deduction lets self-employed people write off up to 20% of their taxes. Self-employment tax is how freelancers and gig workers pay their share of Medicare and Social Security taxes — also known as FICA taxes.

In certain circumstances, yes, but only when it’s cheaper to rent or buy a flat rather than, for example, pay for a hotel while on a business trip. The use of the property should be necessary for the business trip and you must also have a permanent place of residence elsewhere. You should obtain receipts or invoices for accommodation costs as part of your accounting records.