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HMRC internal manual

Business Income Manual

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Specific deductions: travel and subsistence: living expenses abroad — foreign trades

S92-S94 Income Tax (Trading and Other Income) Act 2005

This guidance applies for Income Tax only.

If, either alone or in partnership, an individual carries on a trade wholly outside the UK (a foreign trade), a deduction is allowable in calculating the profits of the trade for certain expenditure on travel, board and lodging incurred in connection with that trade and which would not otherwise be allowable solely due to its failing to meet the ‘wholly and exclusively’ test at BIM37000 onwards.

The deduction is not available where such profits are charged on the remittance basis. It is given only where the trader’s absence from the UK is wholly and exclusively for the purpose of carrying on either the foreign trade or that trade and one or more other trades (whether or not foreign trades).

The deductible expenses are as follows:

(a) Expenses incurred by the trader in travelling between a UK location and the location of the foreign trade.

(b) Expenses incurred by the trader on board and lodging at the location of the foreign trade.

(c) Expenses incurred by the trader in travelling between the location of the foreign trade and the non-UK location of any other trade carried on by him wholly or partly outside the UK.

(d) If the trader’s continuous absence from the UK lasts 60 days or more, expenses of a journey made by his spouse or civil partner or by any child of his between a UK location and the location of any of the trades in question where that journey is made in order to accompany the trader at the beginning of his period of absence or to visit him during that period or is a return journey in connection with a journey of either of those kinds. The deduction is limited to the expenses of two such outward journeys and two return journeys per person per tax year. A child includes a stepchild or an illegitimate child but does not include a person aged 18 or over at the start of the outward journey.

Where more than one foreign trade is carried on at the overseas location, expenses within (a) and (b) above are allocated between the trades on a just and reasonable basis. Where the trader’s absence is for the purpose of carrying on more than one foreign trade, expenses within (d) above are likewise allocated on a just and reasonable basis. Expenses within (c) above are allocated to the trade carried on at the journey’s destination if that is a foreign trade; otherwise they are allocated to the foreign trade carried on at the place of departure. If more than one foreign trade is carried on at the place of destination or at the place of departure, as the case may be, the expenses are again allocated between the foreign trades on a just and reasonable basis.