Maximising take home

[kobestarr]

Hello all,

I have been following this forum for a while as I’m about to undertake a Job in overseas in Norway and as such will be operating via an umbrella company.

They have done a few illustrations for me, which is great but there is something fundamental that I cant understand in the claiming of expenses. It seems like the more I spend on expenses – the more I take home Net.
I asked then to evaluate a few scenarios.

In one case my where my accomdation is 1000 euros my net take home is X per month. When I double my accommodation to 2000 euros and everything else is the same (pension, travel and subsistence) my net take home is X+565 euros per month.

That to me says that I should get the best apartment that I can find and that to maximise take home I should book flights at last minute and might as well pay for business rather than economy as this will increase my net take home.

This seems like a strange fuzzy logic, and I’m sure there is something that I’m missing out in my calculations. Before getting the illustrations I was going to be quite frugal with the accommodation and book as far in advance to get the best plane ticket prices and cycle to the work place from the office etc.

Now I can’t understand why I shouldn’t get a swanky pad, hire a car every week to get to the office and fly business class.

Can anyone help me understand – at the highest possible level - the best way for me to maximise my take home earnings? I’m sure I’m being stupid but in being stupid I can’t figure out how exactly I’m being stupid!

Regards
K*

[Bunk]

Hello all,

I have been following this forum for a while as I’m about to undertake a Job in overseas in Norway and as such will be operating via an umbrella company.

They have done a few illustrations for me, which is great but there is something fundamental that I cant understand in the claiming of expenses. It seems like the more I spend on expenses – the more I take home Net.
I asked then to evaluate a few scenarios.

In one case my where my accomdation is 1000 euros my net take home is X per month. When I double my accommodation to 2000 euros and everything else is the same (pension, travel and subsistence) my net take home is X+565 euros per month.

That to me says that I should get the best apartment that I can find and that to maximise take home I should book flights at last minute and might as well pay for business rather than economy as this will increase my net take home.

This seems like a strange fuzzy logic, and I’m sure there is something that I’m missing out in my calculations. Before getting the illustrations I was going to be quite frugal with the accommodation and book as far in advance to get the best plane ticket prices and cycle to the work place from the office etc.

Now I can’t understand why I shouldn’t get a swanky pad, hire a car every week to get to the office and fly business class.

Can anyone help me understand – at the highest possible level - the best way for me to maximise my take home earnings? I’m sure I’m being stupid but in being stupid I can’t figure out how exactly I’m being stupid!

Regards
K*

I think the key factor you're forgetting is that for you to claim the expense you need to have paid for it first. So getting 565 extra doesn't really justify spending an extra €1000.

[chef]

I think you might be getting confused between

- take home earnings (i.e your salary)
- take home earnings plus expenses.
- company profit and dividends you receive as part of this

If you see take home earnings plus expenses as what you earn then there is nothing wrong if your co. views it as acceptable for you as an employee or your co. to claim expenses for 1st class travel and "acceptable" living accomodation ("acceptable" being suitable for your needs, HMRC might have a few questions if your living away accommodation includes gardening staff, tennis court and swimming pool if your main residence is a 1 bed flat in Hackney) then that is a perfectly legitimate way to run your business, obviously your shareholders (presumably you) would not be thrilled with the knock on effect of a decrease in company profits and therefore most likely a decrease in dividends compared to what your co. could have earned if they had a more strict expenses policy but that is a matter between your director (presmably you) and the shareholders (presumably you) to work out and come to an agreement on. If you are lucky enough to be on the receiving end of your co.'s company expense policy AND you are a majority shareholder in your co. then I can see how you would view the overall benefits of having a relaxed expense policy might be of benefit to you assuming HMRC would also see that it is not overtly lavish.

Obviously I am not an accountant and the exact figures of your situation I would advise to get checked over by a real accountant but I would say that my co. does have quite a reasonable expenses policy in terms that they let me travel first class trains, take business class flights and live in a serviced apartment during the week (as long as the rental contract matches my current client contract). I also like to think that I as company director like to ensure those that work for my co. are happy in their work as I believe that a happy worker is a productive worker. This agreement and subsequent productiveness over the last few years reflect this I believe.

Chef

[kobestarr]

As it is an umbrella company you can't claim dividends.

I understand that spending an extra 1000euros to make 565 doesnt make that much sense on a monthly basis

I have it in my head that whatever i pay out in expenses i get back each month so effectively i'd need a monthly expenses "float" of say £2000.

Is the best way really as I initially thought to claim expenses but only claim what you need so you avoid the double whammy of the tax cost and the expenses cost?

hmm still confused.....
k

[malvolio]

It's not hard.

Expenses are to repay money you have spent out doing the job. Since those work-related expenses are allowable agaisnt tax by the company (in your case, the umbrella) you can reclaim the tax you paid on that bit of your income you used to pay for the business expense, that you have already paid tax on.

The way the umbrellas do this is to adjust your normal PAYE tax to take out the tax element of the expenses you are claiming, hence (apparently) your take home goes up.

However since you can only claim what you've spent, and you can only pay for it with earned income, the gain is a total illusion. Expenses are tax neutral; if they aren't you're doing something illegal.

[mudskipper]

In one case my where my accomdation is 1000 euros my net take home is X per month. When I double my accommodation to 2000 euros and everything else is the same (pension, travel and subsistence) my net take home is X+565 euros per month.

Take home pay isn't the same as what you have left at the end of it all. There ain't no magic expenses fairy, you are paying those expenses.

So in the example above, with 1000 euros accommodation, what goes in your pocket is X - 1000.
With 2000 euros accommodation, it's X + 565 - 2000. You've taken home more of your hard earned dosh, but are still worse off.

Your expenses are effectively tax free, you still pay them, and the more you spend the less you have left.

[kobestarr]

Thanks Guys,

This is what I thought. The Umbrella company that gave me the first illustrations didnt care to explain that. The guy I spoke to made out that i should get the best appartment that I could find.

I have since found another company that disagreed with them!

I couldn't figure out how it could make sense. I'm going to be as frugal as possible! Booking airline tickets waay in advance and also look for shared accomodation rather than getting a one bed flat.

Fantastic - i'm glad its at least clear in my head now.
K*