I am attending a business meeting abroad and my employer will pay for the flights. My employer has agreed that I can add on a week’s holiday whilst out there. I understand that means the flights fail the ‘wholly and exclusively’ rule and so the employer cannot offset the cost against earnings to reduce its corporation tax. However:  
(1) does the employee have to pay any income tax on the cost of the flights as a ‘benefit-in-kind’; and 
(2) does either the employer or the employee have to pay National Insurance contributions on the value of the flight? 

Arthur replies: 

Firstly, see HMRC’s Employment Income Manual at EIM31811, which states: ‘Travel expenses…do not have to be wholly and exclusively incurred: example. An employee has to travel to New York on business for two weeks. While she is there, she has a free weekend and spends it taking a break in Boston. The cost of her flight to New York and any other necessary travelling expenses are deductible. They have been necessarily incurred in travelling to a temporary workplace. The fact that the break in Boston means that the travelling expenses have not been incurred wholly and exclusively for business does not matter. The costs of the break in Boston, such as travelling to Boston from New York and the cost of staying in Boston, are not deductible. These expenses are not attributable to attendance at the temporary workplace.’ Secondly, see HMRC’s Business Income Manual at BIM47107: ‘Expenses linked to personal interests of a director. Sometimes, a company may incur an expense that on enquiry is linked to the personal interests of the director. In this situation you should first consider whether the expenditure gives rise to benefits taxable on the director as part of their remuneration package. If the expense is taxable on the director as part of their remuneration package, then you should allow the deduction as part of the costs of employing the director.’ So, the part of the total expense that relates to the business meeting, including the flight tickets, is an allowable business expense for the company, and not taxable on the employee. The part that relates to the extra week holiday is allowable for the company as any other employee remuneration, and taxable on the employee.