Slightly non-standard expense question from a new contractor

**TykeMerc** · 21 April 2009, 23:54

Originally posted by leehere View Post

I have spent the last few days poring through various tax guides and search engine results, and what I am looking for is just a bit of advice on if I have things right.

Recently I was offered a contract at a site I previously worked at as a Permie. I also lived in the area, but in the 14 months since that job ended have moved away. This means that I would face a commute of about 70 minutes each way, which I am not too keen doing every day.

Reasonable viewpoint

Originally posted by leehere View Post

My understanding is that I would be able to claim accommodation and travel to/from my main residence for the weekend as a tax-offset expense. I would be using an umbrella at first but maybe moving to a limited company once I get in the swing of things.

Correct

Originally posted by leehere View Post

Is a 70 minute daily drive each way considered far enough to be 'unfeasible' by HMRC ? I know some people do this every day, but I personally wouldn't feel safe driving so far after 10+ hours working.

I agree and have stayed away from home in similar circumstances quite often without issues with HMRC

Originally posted by leehere View Post

In the event that I received contract extensions from the initial 6 months, would my previous work as a permanent member of staff count towards my 24 month maximum before a site is ineligible for expense claims?

It's impossible to answer this one with absolute certainty as HMRC tax inspectors seem to make up their own minds on this matter, my opinion is that since you left there 14 months ago you shouldn't have an issue starting the 24 months from day 1 of the new contract.

Originally posted by leehere View Post

Would a house-share or rental be allowable instead of a B&B or a Hotel?

Yes so long as you're maintaining a main residence elsewhere which reading your post you appear to be. I've often taken house shares as I find hotels aggrovating and I like to leave stuff over the weekend. It's important that you can prove it's a commercial arrangement so a rental agreement and receipts are vital.

Welcome to contracting and well done on reading up on the subject first.

**EchoSierra** · 22 April 2009, 09:36

Originally posted by leehere View Post

In the event that I received contract extensions from the initial 6 months, would my previous work as a permanent member of staff count towards my 24 month maximum before a site is ineligible for expense claims?

Would a house-share or rental be allowable instead of a B&B or a Hotel?

Thanks everyone.

Agree with TykeMerc on the last two questions. Maybe you haven't gotten other replies since it was a good one.

I've also stayed at a house-share while away on contract instead of B&B or Hotel as they are cheaper and more convenient so long as you can find one for the short term that you need.

As with everything, keep all receipts and contractual agreements.

**Bengal** · 22 April 2009, 14:49

I have read your post and the responses and do not necessarily disagree with what has been said but I'd like to clarify a couple of points.

In order to claim expenses (be they be for travel, overnight stays or subsitence) the place at which you are working MUST be a TEMPORARY place of work. This is where the 24 month rule comes into being. So in your case, if you left the employment over a year ago then that relationship ended there.

If now you are taking up a contracting position with that company, then you will be entitled to a tax deduction for the expenses (as referred to above) IF and only IF the place at which you will be working is a TEMPORARY place of work. To be a temporary place of work, the "intention" (and this is a very important point) must be from the outset that the duration of your work at that site is expected to be 24 months or less. If the intention from the outset is for you to be working there for say three years then you will not be entitled to any tax deductions. Equally, if you have already started the contract and it was intended from the outset that you would not be there for more than 24 months but then part way through the contract the term is extended so that you will have spent more than 24 months there, then the tax relief ceases from the point that the contract was extended.

There are other rules which need to be considered to establish whether or not a place of work is temporary or not but they are unlikely to be relevant here if you go through an umbrella.

You also mention that you might be going through an umbrella. A misconception is that you "will be entitled" to expenses going through an umbrella. This is not the case. When joining an umbrella, you become an employee of the umbrella. The umbrella, as the employer, does not have to reimburse you for any expenses that you might incur and so I would not assume that you will get all your expenses reimbursed (you will need to make sure you have agreed what expenses the umbrella is prepared to pay you before signing up). This does not howeber mean that you would not be entitled to a tax deduction for the expenses incurred (claimable via your self-assessment income tax returns).

Turning to the type of expenses you can be entitled to a tax deduction for and assuming you meet the "temporary" place of work rule.

Travel

You can claim for your travel from your permanent home to the site (the temporary place of worK) and return. This can be public transport costs or business mileage (maximum 40p per mile - maximum 10,000 miles in the tax year the rate per mile drops for any mileage over and above).

Overnight stays

You can claim a tax deduction for hotel, B&B, rental property (your share if shared property) for any overnight stays. However, with regard to hotels and B&Bs, the overnight stays must be directly linked to the days you are working. So, lets say you live outside London and the contract is with a company in London. You decide that you would like to spend a weekend in London. The the overnight stay for the Friday night and Sunday night could be claimed but the overnight stay for Saturday night would not be claimable as this would be wholly personal. This, of course, would not apply in the case of a rental property for obvious reasons.

As for comments I have seen in various other posts about "maintaining a main residence elsewhere" there is nothing in legislation that requires this. The legislation requires that you are working away from your permanent home (this could be your parent's home or your partner's home which you are not "maintaining") or from a permanent place of work to be entitled to tax deductions.

I suspect the "maintaining a home" point has arisen from the old Working Rule Agreements that were (and in some cases still are) prevelent in the construction and engimneering industries. This is another matter and not of concern in what is discussed here.

Subsistence

If you are working at a temporary place of work you are also entitled to a tax deduction for the cost of subsitence (eg breakfast (if a very early start), lunch, drinks (but not alcohol) and evening meal if staying overnight). If staying in rented accommodation then the food you but in can be claimed. What cannot be claimed is pack lunches from you permanent home.

Evidence of expenses

In all cases to claim a tax deduction for expenses proper reciepts need to be kept (either you retain them or pass them to your employer who is reimbursing you). As for travel by car, HMRC will expect to see proper mileage recrds kept. This should show the date of travel, start and end points of your journey, the reason for travel and the exact mileage travelled (do not round up to nearest 5 or 10 miles).

Scale rate payments

Some umbrella's have negotiated what is known as scale rate payments for subsistence witjh HMRC. Generally, this means that the umbrella can pay you a set amount per day for subsistence without the need for you to provide any receipts. The scale rates are also determined by the number of hours worked in the day, eg 5 to 10 hours - £5, more than 10 hours £10.

Phew long response but I hope this helps!

**leehere** · 22 April 2009, 23:56

Thanks for the replies, you have certainly helped ease my mind!

Some nice detailed information from Bengal too. I had been planning to only claim accommodation and travel as expenses (for tax relief only), but will have to take a closer look at subsistance.

Cheers all, now just to enjoy the (hopfully) sunny weekend before I start my new contract on the monday.

**remark** · 30 May 2010, 12:31

A year after, another new Contractor treads similar path. Two questions:

Overnight stays

You can claim a tax deduction for hotel, B&B, rental property (your share if shared property) for any overnight stays. However, with regard to hotels and B&Bs, the overnight stays must be directly linked to the days you are working. So, lets say you live outside London and the contract is with a company in London. You decide that you would like to spend a weekend in London. The the overnight stay for the Friday night and Sunday night could be claimed but the overnight stay for Saturday night would not be claimable as this would be wholly personal. This, of course, would not apply in the case of a rental property for obvious reasons.

1.My 'short-term' 6monts gig is 400 miles from home, and so I am claiming Hotel Allowances and Subsitence. Now the Umbrella run the check on my expense claim, that I have actually worked for the days I am claiming. In result, for a standard week I have five days expenses covered. But to be onsite, fit and ready Monday 9am I need to stay overnight from Sunday. And surely I am not about to leave Friday 6pm for journey home, so need an overnight stay Fri-Sat.

I see these two extra overnight stays are linked to the performance of the duties, and would like have them covered. But this is not so, as somehow I am told that can be reimbursed only for the days I am actually working. So Fri-Sat is covered but Sun-Mon not. Would appreciate your insight and some links, perhaps, where the above view could be supported.

2.'You decide to spend your weekend in London' - Is it valid for the Umbrella to ask me to spent 'most of my weekends' home. I am not to keen to go back every other weekend but for longer - like bank and regular holidays. Where such request could be grounded.

Could you refer me to any hmrc/legal definitions helping to rectify this once and for good - MANY THANKS

**centurian** · 31 May 2010, 17:03

There are 2 things at play here

1. The reimbursement policy of your "employer" (i.e. the umbrella)
2. Whether HMRC treats such payments as salary

Now for the most part, an umbrella doesn't really care if your expenses are genuine or not, because it doesn't come out of "their" cut. However, that said, umbrella's are keen to demonstrate at least some substance to an HMRC inspector that they have at least looked over your expenses to verify them, which is why they are a little cautious about this expense claim.

Originally posted by remark View Post

Could you refer me to any hmrc/legal definitions helping to rectify this once and for good - MANY THANKS

While you may get some examples and guidelines, you won't get a single rule book that covers every conceivable scenario and possibility.

But even if you do get clarification in your favour - the point is that your "employer" isn't obligated to re-imbusing you - it would just mean that HMRC would allow them to - without requiring you to be taxed on it.

However, if you could get clarification, then this should be enough to convince the legal bods at your umbrella that it is safe to pay you the expense. Like I said, it's not their money they are using.

The key point though - is that HMRC expense guidelines and your umbrella's expense policy are not the same thing.

**remark** · 31 May 2010, 21:38

Thanks for that. I may try to argue the point but see now that the decision is with the umbrella and the policy it runs. For a second question though...

I reviewed the booklet 490 Employee Travel to find out how the temporary workplace and travel expenses are handled. But I can't seem to find anything that would justify the request to travel home /at least/ every other weekend. Where such precaution can be grounded, or can it be just 'for the sake of things'...

**LisaContractorUmbrella** · 1 June 2010, 08:20

Just to clarify Centurian and Remark - an umbrella company should not have an 'expenses policy' that in any way differs from HMR&C guidelines; we are employers and have to operate in the same way as any other employer. Some companies would appear to allow any claims and indeed encourage erroneous claims but I can assure you that it is not true of all of us.

**Sausage Surprise** · 2 June 2010, 12:43

Go limited and pay yourself whatever expenses you like (some may be subject to BIK of course)

Slightly non-standard expense question from a new contractor