Business flying expenses

[Claverley04]

Does anyone know what we can and can't do when it comes to claiming business expenses for flying undertaken on behalf of ones business?
As a PPL, and given the fact that my business takes me all over the UK and beyond, I intend to fly to meetings where practical.
Am I allowed to pay for the flying via my business (tax deductable) and can I claim the VAT back from the wet hire charges of my flying club.
I appreciate that part of this question may well be one for HMRC, but no harm in asking all of you guys as no doubt many of you do fly for business.

Many thanks

[IO540]

I suggest a search of the forum. This has come up many times, and (as with most things) any answers which are actually useful are not one-liners.

[Genghis the Engineer]

Speaking for myself, my current and previous two employers all accepted a route-planner printout and claim as if driven. I did some stuff a couple of years ago for the European Commission who took the same line.

Ignoring my monthly payments, my last trip: aircraft fee - mileage claim came in at £180 for 6 hours flying. They got a more efficient employee, I got 6 hours flying in working hours at £30/hr - win/win. Of course, I own a share, it would be more expensive renting. On the other hand, my employer only pays 36ppm - at the HMRC 45ppm you can pay yourself for the first 10,000 miles -you'd be down to £25/hr.


Last I asked somebody who worked there, CAA permit its own staff to do something similar, but have an organisation rule that you have to have at-least an IMC rating to fly in company time. That is/was however entirely CAA staff policy, and doesn't apply to anybody else. (On the other hand, institute that, and then ask your accountant about treating the IMC course as a business expense?)

G

[late-joiner]

In military service we were allowed to use private aircraft on duty journeys. Various insurance conditions, plus you were allowed to claim mileage to and from airport either end plus direct air mileage at normal car rates. This would all have been cleared with HMRC, so I am sure there is nothing wrong in principle with it. Just checked the regs and they do not appear to have changed substantively in the intervening years since I left.

[flybymike]

Does anyone know what we can and can't do when it comes to claiming business expenses for flying undertaken on behalf of ones business?

Members of our group have been doing it for well over twenty years, including VAT reclaims etc. We currently have a share owned by a company belonging to one of our group pilots, and the company pays all the costs associated with that particular share. We have had other similar shareholder arrangements in the past. We have never had any problems in this respect.
P.S. Don't get IO540 going on the subject of HMRC:)

[stickandrudderman]

It's for HMRC to determine how much they'll pay/allow for business travel, not the means of transport. You can choose whatever form of transport you like, you only need to be able to justify the travel.

[NorthSouth]

My understanding is that it's direct operating costs only i.e. fuel and landing fees; no contribution to maintenance, insurance etc allowed.

NS

[IO540]

That's incorrect. You can claim the business/private % of the total operating cost of the aircraft.

As I said, do a search of the forum :)

[dublinpilot]

As in this case, the person is renting the aircraft from a third party (presumably an unconnected third party), then I don't see what the difference is between renting the aircraft from the flying school and renting a car from Hertz is, as far as tax deductability goes.

The question that you need to ask yourself is the expense "Wholly and exclusively" for the purpose of the business? Wether you can claim it or not is largely based on that answer.

If for example, you were also bringing an instructor along and getting instruction towards your IMCR, you might fail that "wholly and exclusively" test.

[IO540]

If for example, you were also bringing an instructor along and getting instruction towards your IMCR, you might fail that "wholly and exclusively" test.

An interesting point.

If the presence of an instructor caused the test to fail, would that not imply that the IMCR has a value to the pilot?

And if it has a value, that opens up two things

1) An HMRC attack on the pilot under the BIK rules is now possible

2) Flight training should be allowable against income tax (obviously pro-rated according to the % of business v. total airborne time).

One accountant (who I know for sure was not a specialist in this field) told me that CPL/IR training is allowable against income tax, if you are training to be a commercial pilot. But not for a normal non-aviation business owner. Accordingly, I never claimed any of my training costs (which to date must be of the order of £20k and that's before I am done with the ridiculous waste of time and money of the JAA IR).

I am not an accountant but I feel that HMRC cannot have their cake and eat it. The acquisition of an IMCR or an IR very significantly improves the despatch rate on business trips, and should thus be tax deductable (at least partly), and that drops a spanner in the works of disallowing a business flight on which an instructor is present.

I am sure this subject has been looked into by various people, because many if not most high-end aircraft owners are flying with a semi permanent instructor in the RHS.

[dublinpilot]

IO,

I said that it "might" fail the test not that it would. I chose the word "might" very carefully ;)

The test I gave you "wholly and exclusively" is the one that you need to pass.

So let me give you two possible scenarios at either end of the spectrum.

1. The pilot has flown the same route for many years, VFR, and always on business, never pleasure. Let's assume that there is no question that these flights were not business related; it is accepted that they are business flights.

However on this occasion the pilot brings along an IMC instructor and gets some training on the way. Let's also assume that there is no question that if the IMCR instructor was not available, then this flight would also have been made under VFR and it would have been accepted it was for the purpose of the business.

So was this trip wholly and exclusively for the purpose of the business? I would say yes. If it is accepted that the flight would have taken place VFR anyway, and it was business related then the fact that the pilot got some additional benefit is incidental.

The one fly in ointment here would be if there was a fee for the instructor. This *might* not be business related. (There could easily be formed an argument that it is, if the IMCR itself would be business relates, but that is a different argument.)

This case is very similar to a high court case that I'm sure most accountants came across during their studies. A business man was travelling from the country side to the city regularly (by car), and claimed the travel expenses against his business. The Revenue challenged the expenses on the basis that on some of those trips his wife came along so she could spend the day shopping in the city, and therefore the expenses were not "exclusively" for the purpose of the business. The court held that as the trips would not have been made unless the business man needed to go to the city on business, and therefore they were wholly and exclusively for the purpose of the business and the fact that some additional personal benefit was derived from the expenses was irrelevant.

2. Now let’s assume that the pilot always travels on work by car, but has been flying personally on pleasure for many years. They now decide to do their IMCR course. Each flight involves landing at an airfield close by a potential customer that they visit and have a short meeting where they try to sell their services. None of these trips result in any new work for the firm (not wholly relevant), and apart from these IMCR training flights the employee never visited any other potential customers neither before nor after their course. After the training, the pilot never few on business again, neither VFR nor IFR.

In this case I would say that the motivation behind the trips was personal and not business.

Between the two scenarios there is a whole world of different shades of black and white, many of which the Revenue and the tax payer will agree upon, and some which they won't. The argument will though eventually come down to whether the expenditure was wholly and exclusively for the purpose of the business. If everyone agreed on the same set of facts, there would be no need for civil courts! Often a compromised is reached where a percentage of it is agreed to be wholly and exclusively and the remainder not.

BIK is relevant only if it is a company involved. At least in Ireland, and I would assume the UK too, a sole trader cannot be subject to BIK from his own business. If the expense is not business related, then it is simply disallowed.

[IO540]

The test I gave you "wholly and exclusively" is the one that you need to pass.That is the test in the UK too.

Each flight involves landing at an airfield close by a potential customer that they visit and have a short meeting where they try to sell their services. None of these trips result in any new work for the firm (not wholly relevant), and apart from these IMCR training flights the employee never visited any other potential customers neither before nor after their courseI would have thought that such a flight would be admissible as a business flight - so long as you don't put the instructor's cost through the firm.

There is no requirement for a business trip to generate business. Merely having a lunch with a supplier (not a customer) makes a trip a "business trip". There is no law saying you are not allowed to waste company money. The law merely requires any such waste to be wholly related to the company :)

Obviously taking a 2 week holiday in Germany, on which you visit some trade show for 1 day, is a different thing... but if you were to disallow a 1 day trip somewhere, on which you met a business contact at the far end of the trip, on the grounds that it was a training flight also, then much if not most routine business travel would be banned. It would e.g. prevent a sales rep stopping at Tescos at the end of his day, returning from meeting a customer.

And extending the 1-day trip to an overnight stay is pretty easy because European airport opening hours are mostly so useless that a trip of any distance requires an overnight stay, to get back to your home airport.

So now the hotel is a business expense too (unless you had extras in the hotel ;) ;) and then it depends on how they appear on the hotel bill; that I am sure, without actually knowing, is another well lubricated procedure).

BIK is relevant only if it is a company involvedYes; same here.

It's wonderful in places like the IOM where there is no BIK :) But they pay for that heavily in the weather :)

[dublinpilot]

if you were to disallow a 1 day trip somewhere, on which you met a business contact at the far end of the trip, on the grounds that it was a training flight also, then much if not most routine business travel would be banned. It would e.g. prevent a sales rep stopping at Tescos at the end of his day, returning from meeting a customer.

I don't follow the logic in that.

As for the option 2 being a business expense, I don't think you'll get a job with the Revenue ;) I thought I made the circumstances extreme enough to make it obvious that the pilot wanted to get an IMCR for personal use, then created some business trips which clearly were not the motivation for the flight and were nothing but a token jesture to business.

But if were were business and revenue then it would be for a court to decide wheter the trips were wholly and exclusively for the purpose of flight training with an incidental benefit to the business (very incidental in my opinion!) or wholly and exclusively for the purpose of the business, with an incidental benefit to the pilot. I would suggest that the flight would never have taken place if there wasn't the benefit to the pilot and thefore it's not wholly and exclusively for the purpose of the business.

[IO540]

I would suggest that the flight would never have taken place if there wasn't the benefit to the pilot and thefore it's not wholly and exclusively for the purpose of the business.

Is there such a requirement by HMRC, as to the reason for the trip?

AFAIK the "reason" for the trip is not considered. It merely needs to be wholly for the business.

If a "reason" was relevant, most business travel would be banned because you could demonstrably do it via the internet.

Visiting an exhibition is an obvious example. Purely discretionary in most cases, and most stuff on show is of no interest whatsoever. It is usually a total waste of company money.

[dublinpilot]

Is there such a requirement by HMRC, as to the reason for the trip?

AFAIK the "reason" for the trip is not considered. It merely needs to be wholly for the business.


The test is not "wholly" for business purposes. The test as I've said a number of times is is the expenditure "wholly and exclusively" for the purposes of the business. There isn't a seperate test of the "reason" but the reason and motivation behind the expenditure has for a very long time, been taken by the courts as one factor in determing the answer to the wholly and exclusively test.

You seem to be under the impression that if any business advantage is derived from the expenditure then it is tax deductable, but that is not the case.

Take the case where a business man takes his family away for a personal weekend break. The motivation is purely for a break from work with his family. Their return flight gets delayed and delayed because of bad weather. While waiting around the terminal with his family he gets talking to someone else from the flight. It turns out they are in similar business, and they manage to agree a sale/purchase of some supplies. The business mans business has clearly benefited, but still no part of the holiday is tax deductable.

If a "reason" was relevant, most business travel would be banned because you could demonstrably do it via the internet.

I take it this was said tounge in cheek. There is clearly a reason why people still meet when virtually all communication can be done via telephone for a long time at negligable cost. Obviously they feel that there is something in meeting that can't be done via telecommunication.

Visiting an exhibition is an obvious example. Purely discretionary in most cases, and most stuff on show is of no interest whatsoever. It is usually a total waste of company money.

I suspect that reason behind many many exhibitions and conferences is to be a 'jolly' for the participant and very little to do with the business. I also suspect that Revenue would want to disallow these expenditures where they were simply a jolly. Their difficulty arrises in proving that the trip was a holiday and not wholly and exclusively for the purpose of the business. Except in the most obvious of caes they know that they wouldn't be able to prove it.