Umbrella company problem with expenses (+£25K owed)

[ASB]

I'll try and help.

1) I'm afraid there is a legitimate question as to intent. Sure I believe it was an error. But you hadn't much in the way of any due diligence in even looking at how it was paid and itemised.

2) Well, the expenses are your money. They were "just" in effect paid to you gross.

3) As has been said it if was your only contract then it wasn't a temporary workplace and expenses are not claimable anyway. You are reluctant to accept this. Search is your friend.

4) In effect you need to work out how much you were paid in expenses. This amount will be subject to tax at your marginal rate.

5) There is also the question of ER's and EE's NI.

If I knew all your remuneration and your entire expenses history I could have a stab at it. Off the top of my head if you have been paid 25k as expenses that were not really expenses you are looking at about 12k.

[TheFaQQer]

I can claim travel/accommodation... the workplace was temporary as was a short-term contract so that isn't in dispute.

If you only did one piece of work for that employer, then HMRC do NOT see it as a temporary place of work. Since you fit that description, then you need to sort that bit out right now.

If you don't believe what you hear, then search about it, or ring HMRC and tell them that you did some work in one location and then left the employer, and whether that was a temporary place or work or a permanent place.

Something tells me that you won't like what you hear.

I am simply asking if I have any legal redress against the umbrella company as they were effectively my employer, or is negligence on there behalf something that I can do nothing about.

Asked and answered - no.

Read the court case that I provided the link to above where the employee overclaimed by £45k and was prosecuted for fraud. Their defence was that they were incompetent, and got away with it, so bear that in mind if the police come knocking.

Likewise what my options are legally/financially.

Asked and answered.

Rather than providing flippant comments and making a joke of it TheFaQQer, f you can't actual provide something useful keep the comments to yourself.

Have a read through everything that I have written in this thread. Have a look at the court case link I provided, which seems to be very similar to your position.

Speak to a legal professional - you are going to need the advice of someone who might be able to at least alleviate the hole that your incompetence has dug.

[TheCyclingProgrammer]

Maybe I'm missing something but I'm struggling to see how OP can owe the umbrella any money - don't expenses when working for an umbrella effectively come out of your daily rate? In other words, expense claims don't increase your gross income, just how much of it is taxed? I can't see how the umbrella would have paid over money to OP that he hadn't earned.

If this was the case, then he shouldn't owe the umbrella anything, but he would owe HMRC tax on the expenses (all travel and subsistence expenses as people have already pointed out as it being a permanent place of work). Assuming OP is a basic rate payer, that would be £5k although I think payments towards private travel (e.g. commuting) are treated as normal earnings so there would also be employee NIC on top of this and employer NIC (so I guess OP might owe this back to the umbrella so they can pay their NIC bill).

[TheFaQQer]

Maybe I'm missing something but I'm struggling to see how OP can owe the umbrella any money - don't expenses when working for an umbrella effectively come out of your daily rate? In other words, expense claims don't increase your gross income, just how much of it is taxed? I can't see how the umbrella would have paid over money to OP that he hadn't earned.

Good point. They would surely reconcile the invoice with what they are then paying out, pay the expenses and then what's left minus costs etc. becomes salary.

I smell something fishy, and I'm not talking about the contents of Baldrick's apple crumble.

If this was the case, then he shouldn't owe the umbrella anything, but he would owe HMRC tax on the expenses (all travel and subsistence expenses as people have already pointed out as it being a permanent place of work). Assuming OP is a basic rate payer, that would be £5k although I think payments towards private travel (e.g. commuting) are treated as normal earnings so there would also be employee NIC on top of this and employer NIC (so I guess OP might owe this back to the umbrella so they can pay their NIC bill).

Maybe this is where it's coming from. Assuming 2500 miles a week extra being claimed, four weeks a month, eight months a year, that's 80000 miles a year so £21500 that was being claimed which shouldn't have been claimed. That's going to push the OP into the higher tax band, one presumes (unless they were on £20k or thereabouts).

So there's the personal tax plus the two lots of NI to pay on that extra £21k of income, which isn't as bad as it first seemed.

Unless someone cries "fraud"...

[kennygratts]

Thanks for updates, sorry ... not meaning to be rude to anybody, is just really stressful time and have no idea about this kind of stuff. Which is why I used umbrella company as thought would make it easier.

Accept my stupidity and ignorance, just trying to understand what happens as my trust for the umbrella company is now non existent so I no longer have faith in anything they tell me about what is gonna happen moving forward.

I know ignorance is no excuse, and as say I fully accept it is my responsibility but any help so at least I have a better understanding of what it all means.

This certainly sounds better.

[TheCyclingProgrammer]

I know ignorance is no excuse, and as say I fully accept it is my responsibility but any help so at least I have a better understanding of what it all means.

This certainly sounds better.

It is your responsibility but why don't you start by seeking some clarification from the umbrella company as to what exactly you owe and why? You shouldn't have received any money beyond what you've actually invoiced, expenses should just affect the tax liability of what you're paid.

The problem for the umbrella is, if they were paying you via PAYE, that all of the income tax, employee NI and employer NI should have been paid by them to HMRC in their quarterly PAYE payments. Perhaps this is why they say you owe them money. But it should only be the taxes, not the gross amount.

The umbrella should have informed you that travel expenses would not be claimable for a single assignment however.

[Magpie252]

Rather than providing flippant comments and making a joke of it TheFaQQer, f you can't actual provide something useful keep the comments to yourself.

You have either had the good sense or luck to post this on one of the Professional forums, we have to treat you ‘nice’, if you want flippant reply’s try posting in General, then take cover.

As FaQQer has correctly pointed out & I alluded too, expenses are not payable for single contracts due to this effectively being your ‘normal’ place of work.

Have you resigned from the Umbrella, or have they issued you with a P45, if you haven’t resigned or been made redundant you could get another contract then expenses become payable for both.

If the Umbrella made you redundant by issuing you with a P45 there is a slim chance that you could argue that the intention was to continue contracting.

If you resigned (to claim JSA for example) then there never was the intention to continue contracting & expenses are not payable.

Remember you don’t owe £25K, you owe the tax payable on the £25K (i.e. what was refunded tax free.), there’s an argument to be had as too if you owe this to the Umbrella or to HMRC directly.

I’d be inclined to try and get the Umbrella to agree to a refund of the Employers NI contributions due, then deal with the rest direct with HMRC, if your open and honest with them from the start

I assume that this income crosses 2 tax years?, I’d contact HMRC asap and be open that that you may have underpaid tax in the previous year and explain the situation, if you’re lucky they’ll change your tax code to recoup the money or agree a payment plan

You should be able to sort this year’s problems by completing a Self Assessment next April & paying the tax due then.

Have a look here for what happens when you can’t pay HMRC on time HM Revenue & Customs: Problems paying HMRC: advice for businesses, individuals and tax agents

[kennygratts]

What it looks like the umbrella company has done is actually directly pay me at the 40p a mile for the incorrect mileage that I entered. This has gone in as a separate payment added to my pay every month. No questions asked.

So effectively I am a permanent employee of the umbrella company. On this basis until I get the umbrella company to provide a specific breakdown of the figures then to all extent and purpose I would owe them the overpaid amount, or am I incorrect?

Still no idea how HMRC would fit into this ... I am guessing the umbrella company have offset this against their PAYE and NIC?

[northernladuk]

Bearing in mind the umbrella is/was your employer have you called them to go through the situation in detail. Surely that is your first port of call? When you have the exact facts and their take on the situation you can start looking at options.

[TheCyclingProgrammer]

What it looks like the umbrella company has done is actually directly pay me at the 40p a mile for the incorrect mileage that I entered. This has gone in as a separate payment added to my pay every month. No questions asked.

This isn't how umbrellas normally work. They don't pay you expenses out of the goodness of their heart. An umbrella company takes your gross billings, less any VAT, deducts their admin charge, employers NI and then treats the remainder as funds that can be distributed to you as earnings via PAYE, expenses or a combination of both.

Legitimate expenses can be paid to you without any tax and also normally without any reporting/P11D as umbrellas have dispensations - the rest gets paid via PAYE. So if after deducting admin fees and employer NIC you're left with £1000, if you have no expenses you get £1000 via PAYE with NI and tax deducted. If you have £200 of expenses you get £200 as a tax free expense payment and the remaining £800 via PAYE with NI and tax deducted.

At no point should you be able to receive more money than you've actually billed otherwise where does the money come from?

In short, all the payments you've received as "expenses" should have come from your gross billings but as you aren't entitled to claim travel expenses you should have received this money as earnings via PAYE with tax/NI deducted. It also affects how much employers NI should have been due.

So again, you need to talk to your umbrella.