Expenses and the 40% rule

[stuent]

Hi All after 18 months out of the contracting lifestyle I have taken up a new contract and all seems to have changed on the expenses route. The message I am getting from my accountant is that expenses may not be a legitimate business expense!!
I have a single contract with a University,
I will be on site 4-5 days a week
I will need hotel. food and travel to and from either by car or rail.
Expenses are not chargeable.

So my accountant seems to be saying (see below) that regardless of IR35 status (i think I'm out of IR35) I 'may' not be able to claim any expenses becuase I spend more than 40% of my time there.

You can be outside IR35 but general tax law states that where you have a regular client that you spend more than 40% of your time at, their base becomes a secondary base and so you cannot claim travel, accommodation re that base. If say that client sends you off sporadically to a client of theirs, i.e. you land at the deemed 2nd base and they ask you to go and spend a week at one of their clients premises, then the travel and accommodation from the 2nd base to the irregular third base would be allowable.

Is this right???

Thanks

Stu

[eek]

Universities are covered by the new IR35 rules regarding public sector organisations so you will be inside IR35 from April 6th and its best to assume that the entire contract will be inside...

Oh and if you are inside IR35 you cannot claim expenses....

[northernladuk]

Right. First of all you 'think' you are outside. Bearing in mind the differences it makes and the potential fall out of getting it wrong I suggest you go and find out exactly what you are and why. Did you not get your contract checked by QDOS and the like.

Secondly it's the 24 month rule you want to be looking at and there is a very long sticky about this at the top to read through.

That aside. Universities are covered by the FOI requests so classed as a public body? If so you have got a horrible shock coming. As of April you'll be inside IR35 and therefor no expenses can be claimed. There is something about 5% allowance that I don't fully understand TBH. Also your income could drop by 30% as you'll have taxes and NI will apply. I won't labour it as I'm not 100% sure but you need to read the future of contracting sections of the forums.

Are you through an agency? You could do with speaking to them and get their view sharpish.

[northernladuk]

Oh. It looks like they've created a PS and IR35 thread so you need to read through that.

[northernladuk]

Interestingly University of Oxford have an article on it so I was right, you could be stuffed.

https://www.admin.ox.ac.uk/finance/n...axlegislation/

[stuent]

Thanks

Thanks people great feedback - I will be on to my agency first thing!

[TheCyclingProgrammer]

Putting the IR35 stuff aside for a moment...this 40% rule, as your accountant has explained it, is not right. The client office does not become your second permanent workplace just because you spend more than 40% of your time there.

IF you spend more than 40% of your time there, THEN you have to consider the 24 month rule. The very TLDR; version is once you know you're going to be there for more than 24 months (and you're there for more than 40% of the time) then it ceases to be a temporary workplace and you have to stop claiming travel and subsidence expenses.

If you spend less than 40% of your time there OR you know you're not going to be there longer than 24 months then you should be able to claim.

I suggest you read some of the expenses guides.

All of this might be moot due to the IR35 public sector stuff pointed out by others but you should still be aware of how the 24 month rule works for any future non-IR35 contacts.

[stuent]

Oxford Uni

In the article from the Uni of Oxford (thanks for the link)

it states
will be responsible for assessing whether the off-payroll rules (often known as IR35) apply and will be liable and responsible for operating payroll and paying the correct taxes to HMRC if they do.

https://www.admin.ox.ac.uk/finance/n...axlegislation/

So presumably it is not a foregone conclusion that all contracts will be in IR35?

What do you think?

[northernladuk]

Read the Future of contracting and IR35 in PS sections of the forums. This is/has and will be discussed in there in all its horrible glory.

Assume it is a foregone conclusion and you might, just might get a pleasant surprise. But I doubt it. Better tactic is to get out and stay out for now.

[stuent]

I though my accountant was being overly cautious. Thx for the reply