umbrella taxed on re-chargeable client expenses

[MarkOD]

In reality the way it would be worked out would be.

your invoice amount £1000 (5 days at 200 a day) + £100 (recharge)

your umbrella should invoice for £1100

£1100 comes back from your agency

Umbrella work out tax, NI etc based on the £1000 and simply add the £100 to your net return on the bottom

HTH

[Blimey]

Many thanks for your replies. I'm happy to name and shame but don't want this thread erased. Fraid I'm still confused! Frankly, it's a lot less complicated doing high dependency obstetric care which is what I used to do. At this company, other contractors who are with (other) umbrellas get their client rechargeable expenses back in full as their agencies have a process for this, I've also seen umbrellas state they provide this service on the internet - so how can they be acting illegally?

Just to be clear, I am talking about money spent on taxis, hotels and train fares - how is that my income? I am an employee of my umbrella.
I do pass the usual schedule E expenses through them but never pass the same expenses twice.

One colleague has suggested taking them to the small claims court. Any thoughts?

The original receipts lie with the agency now. I suppose what I need is instructions on how to recoup as much as possible. In return, if anyone needs obstetric advice I'd be happy to help!

[Blimey]

MarkOD That's what I thought should happen!!

I am jumping replies here, so sorry if it gets confusing.

Do you think this has anything to do with the fact my agency sent this through separately to my daily rate invoice?

[WindyAnna]

Yep. But my point is it doesn't matter whether they're rechargable expenses or not. If it's not rechargable, the £100 is paid to the contractor by the umbrella and your taxable income is reduced by £100. if it's recharagable, the latter doesn't happen, and your taxable income is £100 more.

Unless the umbrella just doesn't handle any kind of expenses (which seems unlikely), they're doing the right thing.

No - if it is rechargeable your taxable income won't be £100 more, the rehcargeable expenses do not form part of your taxable income. It works the same as for a permie, they claim their expenses and when they are received through the payroll they are tax exempt. Same through a brolly.

[VectraMan]

No - if it is rechargeable your taxable income won't be £100 more, the rehcargeable expenses do not form part of your taxable income. It works the same as for a permie, they claim their expenses and when they are received through the payroll they are tax exempt. Same through a brolly.

Okay, £1000 - £100 expense = £900 taxable income. If rechargable, it's £1000 - £100 expense + £100 reimbursment = £1000 taxable income. Unless I'm being very thick, £1000 is £100 more than £900.

Essentially you treat the reimbursment by the client as part of the sale, and what you've spent is reimbursed by the umbrella.

I think we're probably arguing the same thing. What you can't do is treat the £100 as non-taxable income AND claim another £100 in expenses from the umbrella.

And as I said above, the two don't have to be the same amount. I've been in the situation where the client reimbursed MyCo. Ltd. 40p per mile, but as I'd already passed the 10,000 mile limit MyCo. Ltd. reimbursed me for 25p per mile. If rechargable expenses are automatically non-taxable income, where does the 15p per mile difference go? Answer: if I was paid it, I would be taxed on it.

And nobody's even mentioned VAT yet.