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I’m curious about something:
I have lots of Avios in my personal account. I need to book some flights for business purposes for my company (which I own).
People have written before about valuing Avios, for compensation purposes, at the rate BA sells them at. Personally – I tend to value them at .67p for the Avios->Nectar->Ebay route. Somewhere in the middle is the right number – which is higher for people not constrained by school holiday dates, and lower for parents who live in the provinces.
Would it be reasonable, for corporation & income tax purposes, to “purchase” the flight by paying with Avios, and making a corresponding credit to the directors loan – ie effectively selling the Avios to the company? And if so, what rate would one use?
I am thinking that it would be difficult to justify a rate which made the flights significantly more expensive than the cash price, although the benefits (in terms of flexibility) of Avios booking can make the equivalent cash price (fare type) quite high.
It’s possible, given the latitude we seem to have with Avios (collecting them on personal account from business transactions, sometimes in very large quantity) that it’s best to keep the lid on this can of worms?
This is a difficult thing to search the Internet for, because “business” brings lots of hits for “business class”.
Would be grateful for any thoughts, please.
I’ve seen talk of using the rate that BAEC sell Avios. And justifying it if the flight booking you are making is cheaper to do this way than for the company to pay “real” money. So the company is paying for the business trip and has 2 options, either pay the cash price (for a cancellable ticket as a direct comparison to an avios booking) or buy the avios from you at the market rate (ie that set by BAEC at the current time) if that is cheaper.
The latitude we have for collecting Avios on a personal account from business transaction is the tax law that freebies that come your way with a cash alternative are valued at the cash price, anything that come with no cash option isn’t taxed. So that is written into the rules. What isn’t in a rule book is how an employer sees avios earned on work trips and some companies may require you to use them for work trips. Less so in the UK, but in Germany it is standard practice and any request for personal use of these work created Avios would be verboten.
For reference, where there is no cash alternative for a reward:
https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim100150
If it is your own company, why not just buy the flights for cash.
You would earn some more avios, and the flights would be tax-deductible as a business expense.
Whereas the avios you have are already “tax-free”. So just spend them in Sainsbury on petrol! Or gin!
ps. Also saves the cost of hassling your accountants – that’s worth something too!
Thank you (both) for the suggestions.
The cheapest rate for buying Avios is 200k for £3539; 1.77p/point. That makes a “pay with Avios and transfer to the directors loan at 1.77p/point” situation very attractive in some circumstances.
Id probably just stick with 1p per point and use the BA example of why it’s a more than fair price.
In reality no one will ever check but better safe than sorry.
In reality no one will ever check but better safe than sorry.
Yes I often have thoughts like that when doing the company books – that it’s all a bit angels-on-pinheads, the time I spend on understanding the law and accounting correctly and lawfully; I could deduct a full-blown orgy with hookers and blow every week, and no one would ever check or do anything.
But I’m old/unambitious/stupid and I sleep better knowing that I could make a decent fist of defending my accounting choices to an HMRC investigation.
As per the T’s & C’s, I wouldn’t say they are actually yours to ‘sell’, so you’re creating a very murky transaction either way…
“21.1. Avios points, and all rights of title to and property in such Avios points issued at any time, remain with AGL at all times and never pass to the Member.”
“21.1. Avios points, and all rights of title to and property in such Avios points issued at any time, remain with AGL at all times and never pass to the Member.”
The accounting principle is of substance over form. Those words are in the T&Cs and yet…
This is what we do:
* For currencies where I earn them in the course of HfP business (primarily Avios) then the business does not buy them off me. What I do do, though, is redeem using the ‘least Avios, most cash’ option, because the cash part is a tax write-off.
* For currencies where I do not earn them, at least not in big numbers, on HfP business (eg IHG points), the business buys them off me at the typical selling price when they are being sold with a bonus
Thank you again, all, for this. Thoughtful responses, typical of this site.
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