Do reinbursed expenses count as income?

[IanIan]

Umbrella then?

No umbrella. I was paid directly.

although I can't understand why you brought VAT into it

Because someone wrote...

You should have charged VAT on the expenses.

[minstrel]

Would this only be appropriate if it generated a BIK?

I'm not 100%, but I think unless the company has a dispensation from HMRC, the correct way is for YourCo to declare the reimbursed expense on the P11D and then for you to claim it as both income and an expense on your Tax return. They should both cancel each other out.

Not sure how this applies to IanIan though as the client paid him direct.

I think technically it should be declared as income and expense on the tax return.

[IanIan]

I think technically it should be declared as income and expense on the tax return.

Well the dude on the help line said the same thing.

The key point is that I put the expenses on the invoice. Thus the invoice total gets added to my total income and then the expenses from the invoice are added to the total expenses on the tax return and, as you say, they cancel each other out.

Makes sense to be putting all this on the tax return.

[LisaContractorUmbrella]

Hi IanIan,

can you confirm whether the value of the expenses was paid directly to you by the client or whether it was reimbursed to you via your umbrella company?

[ASB]

Well the dude on the help line said the same thing.

The key point is that I put the expenses on the invoice. Thus the invoice total gets added to my total income and then the expenses from the invoice are added to the total expenses on the tax return and, as you say, they cancel each other out.

Makes sense to be putting all this on the tax return.

OK,

So what you saying seems to be:-

- You (personally) sent an invoice for 1000 quid plus 200 expenses to some person.
- The client paid the expenses direct to you
- Some person is going to pay you 1000 not the 1200 you invoice

So you:-

- Put 200 in expense received type box on you personal tax return.
- Put 200 in the expenses claimed box (thus cancelling it out)

Now you need to issue a credit note to whoever you originally issued the 1200 invoice for.

If you are in fact self employed and you issued the invoice to the client directly (which seemed tyo be implied), then what is the problem? Simply put the client makes 2 payments against the income.
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Warning. Being paid directly expenses incurred from the client is likely to be bad new for your IR35 status. It would be better to refuse the payment (or return it) saying "I'm sorry but the arrangement was that my company billed the expenses."

[Ardesco]

Ahh, I don't have a company. They paid me a personal check after I paid for it personally.

No umbrella. I was paid directly.

So you don't have a company and you aren't using an umbrella?

How are you contracted to the client?

Are you a temp working for the client and being paid via PAYE?

If they are paying you through PAYE they should have already dealt with the tax issue.

[IanIan]

Hi IanIan,
can you confirm whether the value of the expenses was paid directly to you by the client or whether it was reimbursed to you via your umbrella company?

I wasn't using an umbrella company. Thus it was paid directly to me.

So what you saying seems to be:-

- You (personally) sent an invoice for 1000 quid plus 200 expenses to some person.
- The client paid the expenses direct to you
- Some person is going to pay you 1000 not the 1200 you invoice

Nope. A company paid me the full value of the invoice in one payment.

So you don't have a company and you aren't using an umbrella?

Correct.

How are you contracted to the client?

There was no formal contract - just a round of emails saying 'will you do this?' and me saying 'yes' and for how much.

Are you a temp working for the client and being paid via PAYE?

No and no.

Warning. Being paid directly expenses incurred from the client is likely to be bad new for your IR35 status. It would be better to refuse the payment (or return it) saying "I'm sorry but the arrangement was that my company billed the expenses.

Why is this and what else would I do given that I don't have a company?

[Ardesco]

Right, in that case you're a sole trader, have you registered yourself as self employed? If not you need to do so.

You should invoice the client for the cost of the expenses, this money will in effect be your businesses money.

You should then be able to offset business expenses against your business income before working out what you have taken out of the business. If the expenses were incurred exclusively for business reasons you shouldn't have to declare that income on your tax form.

http://www.businesslink.gov.uk/bdotg...3859209&r.s=sc

See the above link for more information.

[Ardesco]

That last quote is not something I said. Since you don't have a LTD company and can't take dividends IR35 won't apply to you. You will be taxed normally on all of your income (i.e. IR35 caught)

[IanIan]

Yes I did register as self employed.

You should then be able to offset business expenses against your business income before working out what you have taken out of the business.

But remember I don't have a business. So everything I get paid is my personal income.

If the expenses were incurred exclusively for business reasons you shouldn't have to declare that income on your tax form.

Yes but the guy on the advisory line said that, because the expenses were included in the total on the invoice, then I need to add them to the tax form as expenses.

I think this makes sense. Otherwise the total of one's invoices isn't going to add up to the income plus expenses specified on one's tax return. It would look like I was under reporting my income if someone were to go and add up the 'money in' on my bank statements.