WHILST NOT AS painful as the dreaded root canal surgery, managing tax as a self-employed associate dentist can be a challenging task – especially when it comes to understanding tax deductible expenses.
In today’s Shipleys Tax article, we will set out a basic guide to various deductible expenses, including travel, subsistence and accommodation: and we look at some problem scenarios.
Travel Expenses
Travel expenses can be a significant cost for associate dentists who need to visit different practices, attend professional courses, or participate in conferences. The good news is that these expenses can be tax-deductible if they are deemed necessary for the business. Here are some guidelines for deducting travel expenses:
a. Ordinary commuting costs between your home and a fixed workplace are generally not deductible. However, travel expenses between different workplaces or temporary work locations are deductible.
b. Expenses related to attending professional courses or conferences, including registration fees, can be claimed if they are relevant to your work as a dentist.
c. If you use your personal vehicle for business purposes, you can claim either the actual expenses incurred (such as fuel, maintenance, and insurance) or a standard mileage rate as set by HMRC.
Remember to keep accurate records of your travel expenses, including receipts, invoices, and a log of your business-related trips.
The good news is that these expenses can be tax-deductible if they are deemed necessary for the business.
Subsistence Expenses
Subsistence expenses, such as meals and beverages, can be deductible if incurred while away from your regular place of work for business purposes. Keep the following guidelines in mind:
a. The expense must be “reasonable” and not lavish or extravagant. HMRC have specific rules and limits on the amount you can claim for meals in certain circumstances.
b. The cost of meals during regular working hours is generally not deductible unless you are away from your usual place of work for a business purpose.
c. If you attend a professional conference or course that includes meals as part of the registration fee, you can claim the entire fee as a deductible expense.
Accommodation Expenses
Accommodation expenses incurred while traveling for business purposes can be tax-deductible. However, specific criteria must be met:
a. The trip must be primarily for business purposes, and the accommodation must be necessary for you to carry out your work-related duties.
b. The cost of the accommodation should be reasonable and not extravagant. HMRC have specific guidelines on the maximum amounts that can be claimed.
If you attend a professional conference or course that includes meals as part of the registration fee, you can claim the entire fee as a deductible expense.
c. Generally, if the trip includes personal activities or vacation time, you must allocate the expenses between the business and personal portions of the trip. Only the business-related portion of the accommodation expenses can be claimed as a deduction.
Some problem scenarios
Let’s look at a few oft recurring travel scenarios that self-employed associate dentists seem to encounter and how the rules for tax deductions might apply:
Scenario 1: Combined Business and Personal Travel
You plan to attend a three-day dental conference in another city. After the conference, you decide to stay for two additional days to explore the city and visit friends.
In this scenario, you must allocate the accommodation expenses between the business and personal portions of the trip. You can claim the accommodation expenses for the three days of the conference as a tax deduction, but the expenses for the additional two days of personal activities are not deductible.
Scenario 2: Accompanying Spouse or Family Members
You are invited to speak at a dental seminar in another country. Your spouse and children accompany you on the trip, but they do not participate in any business-related activities.
In this case, you can claim only the portion of the accommodation expenses attributable to your own stay. If you have to pay extra to accommodate your spouse and children, you cannot claim that additional cost as a tax deduction.
Scenario 3: Business Trip with Side Trips for Personal Reasons
You attend a week-long dental course in another city. During your stay, you decide to take a day trip to a nearby tourist attraction for personal enjoyment.
In this situation, you can still claim the accommodation expenses for the entire week as a tax deduction, as the primary purpose of your trip remains business-related. However, you cannot deduct the expenses related to your side trip, such as admission fees to the tourist attraction or additional transportation costs.
However, you cannot deduct the expenses related to your side trip, such as admission fees to the tourist attraction or additional transportation costs.
Scenario 4: Prolonged Business Stay with Periods of Personal Time
You need to work at a temporary dental practice in a different city for three months. During this time, you rent an apartment for accommodation. On weekends, you often engage in personal activities, such as sightseeing or visiting friends.
In this case, you can generally claim the full cost of the apartment rental as a tax deduction, as the primary purpose of your stay is business-related. The fact that you engage in personal activities during your free time does not disqualify the accommodation expenses from being deductible.
Computer says no…?
All good and well you may think. Not quite unfortunately. The UK tax system has a sneaky habit of throwing a rule or two to scupper your expenses claim, in this case the principle of “duality”. The duality principle refers to the idea that an expense can only be tax deductible if it is incurred wholly and exclusively for the purpose of the trade, profession, or vocation. HMRC frequently uses this rule to deny expenses claims.
The duality principle refers to the idea that an expense can only be tax deductible if it is incurred wholly and exclusively for the purpose of the trade, profession, or vocation. HMRC frequently uses this rule to deny expenses claims.
This principle emphasises the need to accurately allocate expenses between business and personal activities for complex travel and accommodation scenarios. Proper understanding of this rule will also help overcome HMRC challenges and maximizes tax deductions for your dental self employment.
Please note that the information provided in this article should not be considered tax or legal advice. It is always recommended to consult with a tax professional or accountant to receive personalized advice tailored to your specific circumstances and to ensure compliance with the latest tax regulations.
If you are affected by any of the issues above and would like more information, please call 0114 272 4984 or email info@shipleystax.com.
Please note that Shipleys Tax do not give free advice by email or telephone.
