24 month rule and multiple contracts with different jobs (same client)

[Old Greg]

I don't think it is 'tax evasion', if it was that simple, my business expenses could not have been approved. Besides which, there's no way my tax could be that high, it's already high enough without the extra £550 travel / food a month on top which I claim for. It can't all be from tax, that's not possible.

And how is the 24 months worked out anyway? Is that 24 FULL months? Does that take into account weeks I wasn't working for, not claiming for? This whole system is a complete mess.

And what if I just quit in a month? 'My' expectation was to only work up to 2 years anyway.

Who cares? You seem pretty comfortable with the situation. You could always phone HMRC and ask them.

[eek]

Hang on, 'tax on the expenses'? So it's not the full amount then? So say, if I put through £550 a month, how much of that should have gone to HMRC?

And then how do I subsequently put through the 'un-taxable' part of the expense in later months?

An umbrella works as follows (we'll ignore VAT as its irrelevant and I've not calculated the figures just put in very vague values for convenience).
Previously
Invoice £4750
Expenses £550
their fee £100

Sub total £4100
NI employers £410
NI employees £410
Income Tax £1000
Left as income £2300

Payment to you £2280 (+ £550 expenses).

Without travel expenses

Invoice £4750
Expenses £0
their fee £100

Sub total £4650
NI employers £465
NI employees £465
Income Tax £1100
Left as income £2620

Payment to you £2620 (no expenses).

These aren't accurate figures by the way just something to show what the difference is. Expenses don't save you as much as you think they merely save you the tax you would otherwise have had to have paid on the money if HMRC had treated it as income.

[Foxy Stoat]

Ignore all the other posters cause they are not giving you the answer you clearly want to hear. Forget all the correct advice they are giving you. Just go for it,fill your boots and go for it. The only advice you really need is not to bend down for the soap after you investigation....

I'm not ignoring it, in fact I'm asking for more clarity. What is 'tax on the expenses'? So HMRC only gets a certain percentage of that?

[Foxy Stoat]

An umbrella works as follows (we'll ignore VAT as its irrelevant and I've not calculated the figures just put in very vague values for convenience).
Previously
Invoice £4750
Expenses £550
their fee £100

Sub total £4100
NI employers £410
NI employees £410
Income Tax £1000
Left as income £2300

Payment to you £2280 (+ £550 expenses).

Without travel expenses

Invoice £4750
Expenses £0
their fee £100

Sub total £4650
NI employers £465
NI employees £465
Income Tax £1100
Left as income £2620

Payment to you £2620 (no expenses).

These aren't accurate figures by the way just something to show what the difference is. Expenses don't save you as much as you think they merely save you the tax you would otherwise have had to have paid on the money if HMRC had treated it as income.

Okay so this is very interesting. I've added up my full expenses since I started the new 12 month contract; it comes to £2344. Of that, how much would go to HMRC?

I was thinking it would be the whole thing, but if it's only a small proportion, well, that sounds pretty good to me! Wouldn't mind sorting it out then.

[Foxy Stoat]

So, I've been worried that NOT claiming expenses means I would be losing £550 a month. But if it is worked out as being the TAX on that, then have I got this whole thing completely wrong then? I was panicking that my expenses is about a whole THIRD of my salary, that I would suddenly be losing!!!

[mudskipper]

Now my question is, where does this leave me with regard to the 24 month rule?

I think your question has been answered. You're undoubtedly caught by it. You now appear to be trying to justify why you shouldn't be - what do you want us to do? Say, "yes, of course it's unreasonable, you go ahead and claim", then show HMRC this thread when they come a-knocking? It's entirely up to you and your attitude to tax evasion and risk of being caught as to whether you continue to claim. Personally for the sake of a few hundred quid I'd rather sleep easy. Don't get stroppy with us - it ain't our rule.

[malvolio]

Hang on, 'tax on the expenses'? So it's not the full amount then? So say, if I put through £550 a month, how much of that should have gone to HMRC?

And then how do I subsequently put through the 'un-taxable' part of the expense in later months?

Oh FFS...

If you haven't grasped the absolute basic rule, why the hell do you think you're qualified to argue the point? Where do you thik the money for your expenses comes from? I'm sure as hell not paying for your train fares, nor is your client.

Is the expense taxable as a personal BIK or not, is the question. Fail the 24 month rule and it is, so is treated as any other earned income and taxed in full. The easy way to do that through an umbrella company is simply not to claim the expense in the first place - which is what you should be doing.

[LisaContractorUmbrella]

That's a bit strong isn't it mate? I haven't wilfully tried to engage in 'tax evasion'. I've simply carried on doing exactly what I've been doing for the last 22 months, completely sanctioned by my umbrella company. The only reason I'm starting to ask questions about it, is because I read something about a '24 month rule' randomly on another website. No mention of this has been made by my umbrella company at any point. In fact they go out of their way to get you to constantly field expenses. They even tell you to try and put new laptops through, if you can!

Also what about 'my' expectation? I could say well actually no, I personally do not expect to stay longer than 24 months, regardless of contract length. That's actually quite true, because I've been wanting to leave my job for a few months now.

May I suggest that you move umbrella companies? Any company that is encouraging you to claim expenses to which you are not entitled is advocating tax avoidance

[Old Greg]

May I suggest that you move umbrella companies? Any company that is encouraging you to claim expenses to which you are not entitled is advocating tax avoidance

But not to an umbrella that doesn't know the difference between avoidance and evasion.

I think the OP is having some fun with us.

[centurian]

May I suggest that you move umbrella companies? Any company that is encouraging you to claim expenses to which you are not entitled is advocating tax avoidance

Nothing wrong with advocating tax avoidance, but claiming something which you are not entitled to is tax evasion, surely.

Granted, HMRC may be unlikely to launch a criminal prosecution as the OP would protest ignorance, but surely it still amounts to evasion.