When it comes to business travel, the rules for claiming tax relief are strict. While genuine business trips are usually allowable expenses for tax purposes, the picture becomes murkier when trips are combined with holidays or involve family members tagging along. In this article, we’ll unpack when you can claim tax relief, when you can’t and the VAT implications you need to know.
When You Can Claim Tax Relief
For travel expenses to qualify for tax relief, they must be incurred “wholly and exclusively” for the purposes of your trade, profession or employment.
Allowable business trips include:
- Travel to visit clients or suppliers.
- Attending conferences, trade shows or training events directly related to your business.
- Journeys to temporary workplaces (for employees or directors) provided they meet HMRC’s temporary workplace rules.
Example:
If you travel from London to Manchester to attend a 3-day industry conference, the costs of transport, accommodation and reasonable subsistence can generally be claimed.
When Tax Relief is Denied
The problem arises when a trip has both business and private elements. If there’s a dual purpose - both business and personal- the cost is typically not deductible. HMRC and the courts have consistently taken a hard line on this.
In the context of business trips:
- If you extend a business trip to stay on for a holiday, only the business portion is claimable.
For example, if you fly to New York for a 2-day client meeting and then stay 5 extra days for sightseeing, you must apportion the costs - only 2/7ths of the hotel and subsistence would be allowable, and none of the extra leisure activities.
- If your family joins you, their travel and accommodation are not deductible, even if yours is. HMRC expects these costs to be clearly separated on invoices/receipts.
VAT Implications
VAT rules closely mirror the income/corporation tax rules:
- Input VAT can only be reclaimed on business-related costs.
- If an invoice includes both business and private elements (e.g. family hotel rooms) you can only reclaim the VAT on the portion that relates to the business element.
- For overseas travel, VAT recovery depends on the rules of the country visited. UK VAT is often limited to domestic travel and services.
How to Stay Compliant
To avoid HMRC challenges:
- Keep clear records – Document the purpose of the trip, who attended, and the proportion of time spent on business vs. leisure.
- Separate invoices – Where possible, have separate bills for business and personal costs (e.g., request separate hotel bills if family members join).
- Be realistic – Overly generous or exotic travel is likely to be challenged unless clearly justified for business purposes.
A Quick Checklist
Ask yourself:
- Would this trip have taken place if not for business?
- Is there any private benefit?
- Can I apportion the cost fairly between business and private elements?
If the answer to these questions isn’t crystal clear, it’s safer to disallow the private portion.
Key Takeaway
Genuine business travel is tax-deductible, but the “wholly and exclusively” rule means HMRC won’t allow you to sneak in a holiday under the guise of business. Keep your records straight, apportion costs fairly and be mindful of VAT recovery rules to stay on the right side of the taxman.
Need help?
Why not book a meeting with us to discuss your circumstances and see how we can help.