Hi folks, not quite such a noob as I was the last time I posted, but still new enough! I've searched the forums (and the internet) around this question and done a lot of reading, but not found specific enough answers/ links to fully satisfy myself hence starting a new thread. Like the title says, I'm interested in what is allowable for claiming subsistence in my next contract.
I set up my limited company in January and am about to enter a contract with my second client. My first contract (well, first to 5th - it was supposed to be very short term but was extended several times) was unconventional - I worked overseas for some of it and from my registered office at home for the remainder. During that time, as an employee of my company I either made expenses claims of my company either for travel & subsistence using overseas rates for the specific country (for the time periods I was abroad) or nothing (because I was working from home). (as an aside, some of my expense, e.g. flights, airport transport, accommodation, got billed to the client but subsistence for example did not).
I am choosing to operate within IR35 and yes, I know this costs me significant money. Although I believe technically both my contracts with my first client and the one I'm about to sign with the second put me outside IR35, my personal view is the working practices for both put me inside it. I have significant issues with the way IR35 works from a fairness perspective (which can be summarised as, given I have no employment rights why should I pay more tax than the permies) but with my reading of how it works I feel I have little choice (and there are other benefits to contracting via a Ltd Co). I'm well aware of the discussions on all sides and I do know the significance of it so I'd appreciate if you wouldn't challenge this here - I've mentioned it because it obviously affects the accounting position.
Since I'm inside IR35, let's say I'm going to invoice £100k in a year since it's a nice round sum. Tax-wise, all I get to deduct from that is £5k (5% expense allowance) any pension contributions and other allowable payments before the remainder is treated as income and I get taxed full employee and employer NICs and PAYE. Travel and subsistence type expenses paid to me as an employee are the main 'allowable payments' deducted before the rest is treated as salary. For my overseas gig this is fairly significant amounts - and also uncontroversial from an HMRC perspective, I'm careful about what I've claimed. For my next client it's in the UK and a far more 'standard' contract so I'm trying to work out what is allowable and reasonable.
I already understand the 24 month rule. My contract is 6 months so I'm nowhere near that. Even if they extended it'd likely only be for 6 so I won't get to the stage where I either exceed the 24 month rule, or expect to/know I'm going to for ages. I'll cross that bridge when I come to it. So my new client site will be a temporary workplace. So I can claim the train fares no problem, which is good because they're blinking extortionate. (Sometimes I may drive so I'll claim mileage and parking - obviously I will keep good records of all of this).
So the question comes back to subsistence. If my previous working patterns are repeated, I imagine sometimes I'll take packed lunches with me (though it will depend to some extent on things like whether I have access to a microwave once I get there). Obviously I know I can't claim anything - scale rate or otherwise - for those days. But otherwise, given I'm already going to be out of the house typically 13 hours a day including my commute, I will probably buy lunch by the office. This is clearly only happening because I'm at the client site rather than working from my usual place of work (my registered office at home) so in my mind claiming subsistence is entirely reasonable. However there seems to be so much debate about it and I honestly can't find what I feel to be a definitive answer, either on HMRC's website or anywhere else. I'm pretty sure I've confirmed I can't use scale rates without a dispensation and probably can't get a dispensation because I'm a one woman band (just director, no secretary). I'm fine with claiming actual receipted expenses, it's not much more time-consuming.
I have seen many views expressed here pointing out the benefit is only 20% of the amount claimed, etc, and I certainly have sympathy with the view that it might not be worth the hassle. But for me, of course, it's not just 20%. It's actually nearer 50% because of being inside IR35. And actually, it's the principle of the thing.
So... thoughts? Anyone want to show me the highly obvious thread already answering my exact question that my searching has somehow missed?!
All help gratefully received!
I set up my limited company in January and am about to enter a contract with my second client. My first contract (well, first to 5th - it was supposed to be very short term but was extended several times) was unconventional - I worked overseas for some of it and from my registered office at home for the remainder. During that time, as an employee of my company I either made expenses claims of my company either for travel & subsistence using overseas rates for the specific country (for the time periods I was abroad) or nothing (because I was working from home). (as an aside, some of my expense, e.g. flights, airport transport, accommodation, got billed to the client but subsistence for example did not).
I am choosing to operate within IR35 and yes, I know this costs me significant money. Although I believe technically both my contracts with my first client and the one I'm about to sign with the second put me outside IR35, my personal view is the working practices for both put me inside it. I have significant issues with the way IR35 works from a fairness perspective (which can be summarised as, given I have no employment rights why should I pay more tax than the permies) but with my reading of how it works I feel I have little choice (and there are other benefits to contracting via a Ltd Co). I'm well aware of the discussions on all sides and I do know the significance of it so I'd appreciate if you wouldn't challenge this here - I've mentioned it because it obviously affects the accounting position.
Since I'm inside IR35, let's say I'm going to invoice £100k in a year since it's a nice round sum. Tax-wise, all I get to deduct from that is £5k (5% expense allowance) any pension contributions and other allowable payments before the remainder is treated as income and I get taxed full employee and employer NICs and PAYE. Travel and subsistence type expenses paid to me as an employee are the main 'allowable payments' deducted before the rest is treated as salary. For my overseas gig this is fairly significant amounts - and also uncontroversial from an HMRC perspective, I'm careful about what I've claimed. For my next client it's in the UK and a far more 'standard' contract so I'm trying to work out what is allowable and reasonable.
I already understand the 24 month rule. My contract is 6 months so I'm nowhere near that. Even if they extended it'd likely only be for 6 so I won't get to the stage where I either exceed the 24 month rule, or expect to/know I'm going to for ages. I'll cross that bridge when I come to it. So my new client site will be a temporary workplace. So I can claim the train fares no problem, which is good because they're blinking extortionate. (Sometimes I may drive so I'll claim mileage and parking - obviously I will keep good records of all of this).
So the question comes back to subsistence. If my previous working patterns are repeated, I imagine sometimes I'll take packed lunches with me (though it will depend to some extent on things like whether I have access to a microwave once I get there). Obviously I know I can't claim anything - scale rate or otherwise - for those days. But otherwise, given I'm already going to be out of the house typically 13 hours a day including my commute, I will probably buy lunch by the office. This is clearly only happening because I'm at the client site rather than working from my usual place of work (my registered office at home) so in my mind claiming subsistence is entirely reasonable. However there seems to be so much debate about it and I honestly can't find what I feel to be a definitive answer, either on HMRC's website or anywhere else. I'm pretty sure I've confirmed I can't use scale rates without a dispensation and probably can't get a dispensation because I'm a one woman band (just director, no secretary). I'm fine with claiming actual receipted expenses, it's not much more time-consuming.
I have seen many views expressed here pointing out the benefit is only 20% of the amount claimed, etc, and I certainly have sympathy with the view that it might not be worth the hassle. But for me, of course, it's not just 20%. It's actually nearer 50% because of being inside IR35. And actually, it's the principle of the thing.
So... thoughts? Anyone want to show me the highly obvious thread already answering my exact question that my searching has somehow missed?!
All help gratefully received!
- AFAIK, the scale rates can only apply if YourCo has a dispensation. 
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