Tax advice of the week: stay with friends on business trips

If you run a business and have employees yourself included who travel a fair bit, you may be looking for ways to cut down on hotel expenses, says Tax Tips & Advice. One option, provided you have friends in the right area, is to stay with them and pay them a small amount of cash. You can claim this as a business expense, while the cash can provide a tax-free perk to your friends or relatives.

The taxman considers a payment of up to £25 per night to be reasonable, but this is only a guideline, and if the arrangement is "put on a more formal basis", they could charge you a 'rent' for occupation of the room, which could be more than £25, but less than you would pay for a room in a local hotel. The 'rent' received by your friend would be tax-free under the rent-a-room scheme provided they received less than £4,250 in any tax year, but should be declared as property income on their tax return.

For your part, if your existing P11D dispensation covers travel expenses, this should be sufficient to cover you under these circumstances. If not, you should submit an amended dispensation[pdf].

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