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. If you’re mixing business and pleasure, you’ll need to make sure you separate the genuine business costs from any personal ones.

{{ltd-guide}}

Don’t mix business with leisure

HMRC’s concept of “duality” is important when you’re mixing any kind of business and personal travel. The key question is whether an expense was incurred for a genuine business purpose, or whether you’re simply adding personal costs to a business trip. Now, that doesn’t mean you have to spend your entire trip staring at a slides presentation, you are allowed to have some downtime away from work. The important part comes when you’re splitting up genuine business costs from the personal ones. 

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? Go for it! Just don’t assume the extra personal costs are suddenly a business expense.

For example, a turbine engineer could have a genuine business trip from Monday to Wednesday, and decide to stay until Saturday. The business costs associated with the genuine work trip may still be allowable, while the additional personal costs of staying on are theirs to cover.

A useful rule of thumb:

If you’d have incurred the cost even if the business trip hadn’t happened, that’s a good sign to stop and ask yourself whether that’s really a business expense. We often see people assume that because the overall trip is for business, everything they spend while they’re there can be claimed. Unfortunately, HMRC doesn’t quite work that way.

What about bringing your spouse?

This is another common question we see as accountants: what if I want to bring my spouse along? The answer is that if they’re simply coming along for the trip, their travel and accommodation costs are generally considered personal expenses. Even if your own trip is entirely for business

However, as with most things tax-related, there are exceptions. If your spouse has a genuine business role and there’s a legitimate reason for them to be there, the tax treatment can be different. For example, they might have a particular skill that’s needed for the trip, such as an interpreter if you’re meeting overseas clients who don’t speak English. Other examples could be providing specialist technical expertise relevant to the work you’re carrying out. 

Spending money

Once you’ve actually arrived at your destination, HMRC’s rules on what you can claim are a little more straightforward. You can generally claim genuine business expenses incurred while travelling for work, just as you would with domestic spending. Keep your receipts and make a note of what the expense was for – especially if there’s any chance you’ll struggle to remember what that €47 taxi ride was for six months later.

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 you're manually converting lots of foreign transactions, keeping track of which exchange rate to use can quickly become a pain.

That's where Crunch can help. Our Statement Converter automatically converts USD, EUR, CAD and AUD statements into GBP, using automatic, real-time historical exchange rates from the European Central Bank (ECB) for accuracy. So instead of manually working out the sterling value of every transaction, you can let Crunch do the currency conversion for you.

If you paid for the expense using your business card, keeping the original receipt alongside the amount that actually left your account gives you a useful paper trail. If you paid personally and are reclaiming the cost from the business, keep the receipt and evidence of the amount you’re claiming.

{{st-expense-guide}}

What about HMRC's overseas scale rates?

If you're travelling abroad for work as an employee, HMRC publishes a list of overseas scale rates, covering accommodation and subsistence for different countries and cities. They're designed to simplify things when you're claiming certain business travel expenses, but they aren't simply a daily allowance you can pocket regardless of what you've spent. 

There are specific rules around when and how the rates can be used, and you need to have actually incurred qualifying expenses. HMRC's current guidance also sets out different rates and methods depending on the circumstances of the trip.

Our accountant's tip: 

Don't just grab an old rate you've found online. HMRC's overseas rates can change, so check the current rate for the country or city you're travelling to before submitting your expenses. If in doubt, always reach out to your accountant who can talk you through foreign business travel claims.

Souvenirs

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 purchase assets abroad for your business. However, you need to deal with the relevant tax and VAT rules correctly.

This is where things can get a little more complicated. If you purchase a business asset, for example, a camera, laptop or some other sizeable piece of equipment, you may be able to recover foreign VAT or sales tax through the relevant refund process, depending on the country and the circumstances.

Don't assume foreign VAT is the same as UK VAT, though. You can't simply put foreign VAT on your UK VAT return as though you'd bought the item in the UK. There are separate rules for reclaiming VAT incurred overseas, and bringing goods back into the UK can also create VAT and customs considerations.

A real-life example of foreign business travel

Say you’re travelling to Germany for a client project and buy a €1,500 laptop that you’ll use entirely for your business. The laptop itself may be a legitimate business purchase, but there are a few questions to consider:

1. Can you recover the German VAT?

Potentially, depending on the relevant rules. You shouldn’t assume that you can automatically reclaim the VAT back on your UK VAT return simply because you paid tax on the purchase. 

2. What happens when you bring the laptop back to the UK?

You may need to consider import VAT and customs requirements. If you’re buying an expensive asset abroad, it’s worth checking the VAT position before you buy it rather than trying to untangle it afterwards. 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.

‍

Want other resources?

We have a whole host of other content designed to help self-employed professionals like you. From helpful articles to webinars, and downloadable resources to free calculators. We've got you covered!