We’re living in a global economy, and if you want to grow your business fast, foreign clients can be a great source of income, as well as a great excuse to see the world. With the increase in people becoming self-employed and online work becoming the norm, there’s never been greater potential to source work from overseas.
Sometimes a big business deal needs a personal touch, and that usually means hopping on a plane to shake some hands in foreign lands. Most business owners will have their domestic business travel sussed – save your taxi receipts, claim your business miles etc. – but international business travel has a few quirks you need to know about.
The same rules apply
HMRC’s house rules for claiming business expenses – that they must be “wholly and exclusively” for business purposes – apply wherever you are in the world.
The requirement to keep proof of purchase is also a worldwide one, so be sure to look up “Can I have a receipt, please?” in your phrase book before hopping in that taxi in Shanghai.
Foreign travel will provide a great opportunity to let your hair down and enjoy a few sangrias by the pool – but the taxman never takes holidays, and if anything, HMRC’s eligibility requirements for allowable expenses abroad are even more strict than at home.
Don’t mix business with leisure
HMRC’s concept of “duality” means any whiff of personal benefit will render foreign travel inadmissible as a business expense.
Want to delay your flight home by a few days so you can take in the historic gothic architecture of Bremen after the 7th International Offshore Wind Power Substations Conference? Nein! (No) that would mean you can’t claim it back.
Want to bring your spouse along to Stockholm so they can enjoy the hotel gym while you go to Wikimania? No longer an allowable expense, kompis (for the non-Swedish speaker that means buddy in Swedish!).
It’s not impossible to enjoy a bit of leisure time when travelling overseas for business, but HMRC’s rules are strict and there has to be a clear divider when you close your laptop and open up your Lonely Planet.
Our hapless turbine engineer travelling to Bremen could book outward and return tickets separately, and the conference accommodation and the leisure days as two distinct bookings. They’d then claim for the outward flight and the conference accommodation, and pay for the rest out of their own pocket. Sehr einfach (very easy)!
The enthusiastic Wikipedian travelling to Sweden? Book the spouse’s travel separately, put them up in a different hotel and they’re bra (good!).
A tremendous hassle, but those are HMRC’s rules. Generally speaking, if an invoice, bill or receipt has spending for personal benefit on it, you can’t claim it back.
Once you’ve actually arrived at your destination, HMRC’s rules on what you can claim are a little more straightforward.
You can treat foreign expenses exactly as you’d treat domestic spending – just keep the receipt and claim the whole amount back.
If you lose your receipts or want to keep things simple, the taxman has a handy (if huge) list of subsistence rates for every country on Earth, including major cities. It’s important to note these rates aren’t allowances – you can only claim the amounts prescribed by HMRC if you actually incur expenses up to that amount.
If you travel regularly, you’re probably used to juggling exchange rates, and they can make claiming expenses tricky. A €30 taxi ride could cost £20 when you take it, £21 when it comes out of your bank account, and £22 when you come to claim the expense in your accounting software. If in doubt, always use the amount that left your bank account – it’ll make your bookkeeping that much simpler.
It’s almost impossible to go on holiday and not return with a bag full of tourist tat. If you plan to purchase something a little more substantial than a fridge magnet, you can take advantage of lower prices abroad to purchase assets for your business – as long as you pay the correct taxes.
Many countries will allow foreign visitors to reclaim sales tax, either when they leave the country or when they buy (many large malls will have tax reclaim counters). If you purchase a business asset – for example a camera, laptop or some other sizeable piece of equipment – you can reclaim the sales tax. You’ll need to declare the asset when you return to the UK and pay any applicable VAT, but if you’re Standard VAT registered you can reclaim that on your next return.
You’ll save your business a tidy sum, and your new purchase will probably prove much more useful than a bottle of Absolut Vodka and a Dala horse.
If you’re looking for more information on what expenses you can claim then our articles “What expenses can I claim as a limited company?” or “What expenses can I claim as a sole trader?” should be just what you need. Alternatively, for freelancers who prefer their home comforts, we've got a guide on working from home tax relief too.