No idea where to start....

[scsrowe]

Looking for help for my 17y old son...

Over the summer he took a contractor job and was advised to use Liberty Bishop.

When he was paid, he was heavily taxed due to an emergency tax code.

He was also taxed on his reimbursed expenses - so train travel from the company offices to the place of work, hotel and food etc.

Surely this is wrong - how can they tax you on money paid out that has already been taxed at source?!

Liberty Bishop are being useless - we've tried e-mailing and calling but we just get told all expenses are taxable.

I'd really appreciate any help on this!

[VectraMan]

Them's the rules.

He should at least be able to get the extra tax he paid under emergency tax refunded.

[northernladuk]

Something isn't right here. I didn't think Umbrella people could claim expenses back. Are they using some odd process where they pay him the money rather than it being an expense??

Check the Umbrella forums for more detail and sorry tales around this...

Umbrella Companies

[VectraMan]

Sounds to me that the client is paying him expenses on top of the agreed rate, but because of the changes to the rules they're treated as income and taxed. And that's what the OP is complaining about.

[northernladuk]

Sounds to me that the client is paying him expenses on top of the agreed rate, but because of the changes to the rules they're treated as income and taxed. And that's what the OP is complaining about.

It does indeed.

[original PM]

This is really not clear at all - the first paragraph says if you use a brolly and are caught by IR35 then you cannot claim, where as if not caught you can claim.

But the second paragraph seems to contradict this saying all Umbrella workers cannot claim expenses - which would then very quickly negate any benefit of using a brolly?

Or not?



"Effective from April 2016: Workers employed through intermediaries such as umbrella companies or limited company directors who are working inside IR35, can no longer claim for travel and subsistence costs as expenses and incur tax relief on these costs. However, these new rules will only apply to workers who are under the direct control, supervision and direction of their end-client, or are essentially working inside IR35. For more information on IR35 read our plain English guide to IR35.

Umbrella company contractors
The changes outlined in the 2015 budget will restrict the ability of umbrella company contractors to claim tax relief on travel and subsistence expenses. Previously umbrella company contractors were able to claim a limited number of expenses such as travel and equipment costs. However, under these new rules umbrella company contractors will find that their ability to claim travel and subsistence costs as tax deductible expenses is reduced. If you would like to find out more about working through an umbrella company then you may find our guide to umbrella company services page useful."

[eek]

Sounds to me that the client is paying him expenses on top of the agreed rate, but because of the changes to the rules they're treated as income and taxed. And that's what the OP is complaining about.

They've paid him expenses that should have been tax free (its from the company's office to the end clients office so that's perfectly acceptable employee expenses) but probably because it wasn't made clear on the claim its been marked as income to be taxed rather than an allowable expense that should have been paid gross.

To Original PM
If he was claiming from home to the company's office than that would be excluded by paragraph 2 (you used to be able to do the above from the 2nd end client onwards until the T&S changes in April assuming you had more than 1 end client whilst working for the same umbrella)

[northernladuk]

This is really not clear at all - the first paragraph says if you use a brolly and are caught by IR35 then you cannot claim, where as if not caught you can claim.

But the second paragraph seems to contradict this saying all Umbrella workers cannot claim expenses - which would then very quickly negate any benefit of using a brolly?

Or not?



"Effective from April 2016: Workers employed through intermediaries such as umbrella companies or limited company directors who are working inside IR35, can no longer claim for travel and subsistence costs as expenses and incur tax relief on these costs. However, these new rules will only apply to workers who are under the direct control, supervision and direction of their end-client, or are essentially working inside IR35. For more information on IR35 read our plain English guide to IR35.

Umbrella company contractors
The changes outlined in the 2015 budget will restrict the ability of umbrella company contractors to claim tax relief on travel and subsistence expenses. Previously umbrella company contractors were able to claim a limited number of expenses such as travel and equipment costs. However, under these new rules umbrella company contractors will find that their ability to claim travel and subsistence costs as tax deductible expenses is reduced. If you would like to find out more about working through an umbrella company then you may find our guide to umbrella company services page useful."

OK I only spotted the one paragraph and might have quoted the wrong one. The April 2016 one is obviously the new rules which means inside IR35 and brollies can't claim expenses and yes was a bit of disaster for Umbrellas

I'll delete the quote to avoid confusion

[scsrowe]

They've paid him expenses that should have been tax free (its from the company's office to the end clients office) but probably because it wasn't made clear its been marked as income to be taxed rather than paid gross.

Yes, paid to travel from the company offices in London to Newcastle - ironically to work within HMRC! He had to stay in a hotel there, and they gave him an allowance to use for food. He also used data on his phone to be able to work on the train.

Because they have taxed him on this, he's effectively paid tax twice! How do we reclaim the tax he's paid on the expenses?

[eek]

Yes, paid to travel from the company offices in London to Newcastle - ironically to work within HMRC! He had to stay in a hotel there, and they gave him an allowance to use for food. He also used data on his phone to be able to work on the train.

Because they have taxed him on this, he's effectively paid tax twice! How do we reclaim the tax he's paid on the expenses?

I think your only option is to reclaim the tax paid when he can on his self assessment form. I've sent a link to Lucy at contractor umbrella so hopefully she will appear tomorrow to give you a better answer.