Umbrella Company Tax Issues
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  1. #1

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    Default Umbrella Company Tax Issues

    I'm after some advice following an issue that has arisen after working as a contractor for three months.

    I got the opportunity to do some contract work and so lept at the opportunity whilst I was in between jobs.

    As I was new to contracting, I decided to use an Umbrella company and after a quick search on the internet, I found what seemed to be a very good one.

    Having only worked for them for 3 months, I submitted expenses as per their guidelines yet I never got the full amount of expenses passed onto my pay statements. I believed that they would sort this problem out once I completed the contract.

    Having now finished the contract and received my last payment, I decided to give them a call to find out why I had not been able to claim all my expenses against tax. On the phone, I was told that I could only claim expenses against my commission amount as the actual salary figure was minimum basic wage, I was slightly confused over this as the majority of my income was paid as PBA which I believe means (Payment Between Assignments)....anyone confused because I am!!!

    The representative at the Umbrella company told me that she would speak to her colleague and get back to me with information about how I could claim my full complement of Expenses. Here is her email reply (I have removed the company name for the time being):

    Hi Justin,

    Further to our earlier call, I have spoken to my colleague in the accounts team and she has advised that unfortunately as you have only completed one contract throughout the term of your employment with XXXX Umbrella, effectively making the temporary place of work your normal place of work for tax purposes, therefore eliminating the relief on any travel and subsistence expenses that you may have previously had the benefit of during the time that you were employed. Therefore all expenses which have been offset from you tax liability will be reported on a P11D and submitted to the HMRC in order for the tax to be repaid.

    You can complete a self-assessment or complete a P87 form (which is downloadable from the HMRC website) and submit to the HMRC in order to reverse the tax burden.

    If you need any further information please do not hesitate to contact me.

    Kind Regards



    As you can Imagine, I am fairly worried about this now.

    Any comments or advice would be kindly welcomed.

    Many Thanks,

    Justin

  2. #2

    Umbrella Queen

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    Hi Justin2513,

    Firstly, pay between assignments is exactly that - money that is paid whilst you are employed by an umbrella company but not working on an assignment so the income you received should not have been defined as such.

    Secondly, I am not sure I understand why your umbrella company was unable to process all your expenses; the income type (whether minimum wage salary or assignment bonus) is irrelevant. It may be that your expenses were so high as to reduce your taxable earnings to below minimum wage levels.

    Thirdly, all umbrella companies should operate an overarching contract of employment which has the effect of maintaining continuous employment whilst the contractor works on a number of temporary assignments. If you were to sign up with an umbrella company with only one assignment between 2 permanent jobs then it would, by default, become a permanent workplace and therefore you would not be able to claim travel expenses. If your intention, when you started working with them, was to work on more than one assignment the expense would be allowable

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    Default

    This probably explains why the Umbrella I was planning to use told me that I cannot claim for travel expenses as I'm new to the Umbrella company. It sounds like I have to stay with them under different contracts to avoid the "temp place of work" issue. Still doesn't make sense to me though.

  4. #4

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    Quote Originally Posted by Benny Boy View Post
    This probably explains why the Umbrella I was planning to use told me that I cannot claim for travel expenses as I'm new to the Umbrella company. It sounds like I have to stay with them under different contracts to avoid the "temp place of work" issue. Still doesn't make sense to me though.
    Have your umbrella company responded to your questions?
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