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The Senior Manager Test

8 February 2012 No Comment

When judging whether you can reclaim an expense from your own limited company use the Senior Manager Test. It assumes that you have already understood what is a business expense.

Let’s assume that you are now the CEO of a really big organisation with over 1,000 imaginary people and you have about 10 mythical senior managers to help. And they all have expense accounts like yours, and they all like to claim the same sorts of things that you do. If all ten of these senior managers submitted reimbursement claims to you (including the same type of expense as the one in your head right now) would you allow the claims in full or strike out the items that looked like mickey taking? After all, it’s your business, you built it up, and the more you pay out to others, the less profit you have for yourself. You are effectivley handing them your own money, so you want to be sure that it’s for sound business reasons!

You know what looks right and you know what looks wrong. If you would deny a particular item on a claim from the mythical senior managers, then you cannot equitably allow yourself to claim for that same sort of item just because you’re the CEO! Use a degree of judgement and common sense.

If you do put an item through as an expense when you shouldn’t, we are not going to evaluate it. We are not close enough to the action to know all the circumstances of that one expense. And there are simply too many claims for us to look at, so we do not (and we will not) inspect the credentials of every single item, nor will we dwell on long discussions of ethics. Your questionable claim will simply go through the books regardless, and if you get picked up for enquiry, then you will presumably have a convincing explanation for the tax man.

We no longer argue with clients over what is authentic and what is not. It’s your call.

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