Business owners warned over travel tax as HMRC scrutiny increases

Chartered accountancy firm Ridgefield Consulting says that mixing business and leisure on the same trip is increasing confusion about what can legitimately be claimed.

The firm warns that, with increased scrutiny from HM Revenue & Customs, mistakes can lead to penalties, interest on unpaid tax or even further investigation.

Where a trip is undertaken solely for business purposes, costs such as travel, accommodation, subsistence and conference fees may be allowable, provided they are incurred “wholly and exclusively” for the purposes of the trade.

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However, once any personal element is introduced – for example, extending a stay or taking family members along – the position becomes more complex and not all costs will remain deductible.

Flights are one common flashpoint, with only the proportion attributable to business use normally claimable if a trip includes both work and holiday time.

Hotel bills must also be split, with additional nights for leisure funded privately and any apportionment carried out on a reasonable basis.

Family members may accompany a business traveller, but their travel and accommodation costs are treated as personal expenditure and should be excluded from business claims.

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Subsistence is generally allowable only where it arises because of business travel to a temporary or irregular place of work, not for entertainment or non‑essential dining.

Ridgefield Consulting says the practical difficulty lies less in the rules themselves and more in applying them when trips blend work and leisure.

The firm advises business owners to establish and document the primary purpose of each trip before booking, clearly identifying the meetings, conferences or client engagements involved.

Any planned personal time should be recorded separately from the outset to make it easier to distinguish between business and private costs later.

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It also recommends separating costs in real time rather than retrospectively, allocating flights, accommodation and subsistence between business and leisure as they are incurred.

Accurate records, including invoices and notes of business activity, help to strengthen the audit trail if HMRC reviews expense claims.

Managing director Simon Thomas said: “Many business owners understand that travel costs can be claimed when incurred for business purposes.

“However, as we move further into a hybrid working world, where trips increasingly combine both business and leisure, the distinction between allowable and non‑allowable expenses is becoming less clear.

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“This lack of clarity not only raises the risk of incorrectly claimed expenses but also increases the likelihood of fines or, in the worst-case scenario, HMRC investigations.

“A common misconception is that the presence of a business meeting or event allows the entire trip to be treated as deductible.

“In reality, only costs that are directly attributable to business activity can be claimed.

“Where personal elements are introduced, it is essential that costs are clearly separated and documented to ensure compliance and unexpected tax liabilities.”

With more businesses moving onto Making Tax Digital and reporting more frequently, Ridgefield Consulting says clear separation of business and personal costs, accurate apportionment and robust record‑keeping are increasingly important to avoid problems with HMRC.