Subsistence, Meals and a short term contract?

[bobhope]

I know you are new to this and will try to make allowances, BUT....

If you, Mr R2, pay out money for something - food, accommodation, travel, computers, mobile phone, (but perhaps not tennis lessons) - that you wouldn't have paid out if you hadn't been working at the time, then you are entitled to reclaim the cost from your employer. For most sensible contractors, that is their own company, but in your case it is the umbrella company. You should get the whole receipted cost back and there is no tax to pay on it.

However, umbrella companies have a charming (and dubious) habit of treating expenses as some sort of tax-free income scam - perhaps because they can make it look like you're earning money and not getting taxed on it. You aren't.

How your umbrella works is between you and them. Expenses are not income and hence are not taxable, BUT you can only claim expenses you have paid out, no more no less. They are supposed to be cost neutral, if they aren't (the classic example being the company car that you use at weekends) they represent a benefit in kind and that notional income becomes taxable

Finally, the £5 a day allowance is recognition by HMRC that people working away from home are bound to spend some money on odds and sods that are too small for receipts - your daily paper, for example - and so will turn a blind eye to an extra £5 a day from your employer to you for each day you are away from home and working. That's all it is, there are no income tax/NIC angles. Chances are your umbrella is telling fibs, which is why we say to check their facts carefully and be very wary of any lack of clarity. It's not them that gets the tax bill, fines, interest and prison sentence for tax evasion.

Now go do your own homework before I start charging...

It would be rude not to point out that r2d2d3d4d5 is correct and malvolio wrong: the tax/NI saved by taking £5/day as an expense allowance and not as salary is not £48 / year.

Yes 48*5*5*0.22=£264 is nearer the truth, albeit an underestimation. You're more likely to be saving:

240 * 5 * (0.4 + 0.12) = £624

i.e. most contractor's marginal tax rate is 40% + you would have to pay 12% employer's NI.

[malvolio]

The maths don't matter, the question was about taking expenses as income in order to save tax. And the answer is, you can't. Is that too hard to understand?

Sorry, but I get seriously pissed off about contractors claiming every last penny of expense they can think off to save fourpence a year going to the taxman, but can't be arsed to set up their own company and save a couple of thousand. If you really want to be a glofiried agency temp, then fine, but please don't pretend you're running anything other more business-like than a tax avoidance scheme.

[John Galt]

For once Mal I agree with you! But don't you think that there is a lot of really duff information floating about with expenses and what you can and can't claim. It's ok for us old duffers who have been around for a while but it's really no wonder that the little newbies get all confused. There are some good sites (PCG being one) but there is so much contradictory information out there that I think some people must get to the stage of thinking I don't know who to believe. Oh good grief - does this mean I will have to start being all understanding with the newbies on here

[malvolio]

Steady on, go and sit down for a bit until you feel better...

No, you're right. All we can do is keep pushing the line that expenses are not income and people that mix the two up are heading for problems. However, I wonder if the PCG could be persuaded to include a bit more on that subject in their guides...

[John Galt]

Steady on, go and sit down for a bit until you feel better...

No, you're right. All we can do is keep pushing the line that expenses are not income and people that mix the two up are heading for problems. However, I wonder if the PCG could be persuaded to include a bit more on that subject in their guides...

I think it would help. Going for a sit down now...

[malvolio]

I think it would help. Going for a sit down now...

Seek and ye shall find, ask and thou shalt receive...

There's a new edition on its way and this area will be covered.

[The Lone Gunman]

On Shout99 there is an ask an expert section where only the experts can reply.

It might help to have one of those on here.
One where "confused of Milton Keynes" won't get an ill informed or abusive response from some of the less able of controlling themselves, or even a well intentioned but wrong answer from me.

I liked the Ltd. vs Brolly thing from Simon, but the following debate has muddied the waters somewhat.

A set of well presented Can and Can nots on a number of subjects would be useful to the newbies (and some old hands too).
2 year rule.
Mileage allowance.
Out of pocket exes.
IR35 pointers and how to avoid/use them.

That sort of thing, but experts only.

[oxtailsoup]

On Shout99 there is an ask an expert section where only the experts can reply.

It might help to have one of those on here.
One where "confused of Milton Keynes" won't get an ill informed or abusive response from some of the less able of controlling themselves, or even a well intentioned but wrong answer from me.

I liked the Ltd. vs Brolly thing from Simon, but the following debate has muddied the waters somewhat.

A set of well presented Can and Can nots on a number of subjects would be useful to the newbies (and some old hands too).
2 year rule.
Mileage allowance.
Out of pocket exes.
IR35 pointers and how to avoid/use them.

That sort of thing, but experts only.

The problem with this is that even the experts can only offer limited advice as HMRC seems to be hell bent on changing (bending) their own rules to suit themselves as they go. Even they can't keep up.

[The Lone Gunman]

The problem with this is that even the experts can only offer limited advice as HMRC seems to be hell bent on changing (bending) their own rules to suit themselves as they go. Even they can't keep up.

Could be fun to watch Simon and Darren duking it out over the finer points of legislation though.

[oxtailsoup]

Funnily enough SJD gave me some advice regarding dividend splits (husband and wife) which was based on HMRC's case against Artic (though our circumstances were somewhat different). I didn't agree with the advice given so I rang HMRC help line - they gave me different advice, more favourable to myself because our circumstances are different as my wife is a fee earner, although not as high as me, she still works the same hours give or take so her input is equal in effort if not revenue. The person from HMRC admitted that the whole thing is one big grey area and they don't know themselves what is going on (the staff) because they had just lost the case and were considering an appeal. It must be very difficult for people like SJD to give advice which is probably why they air on the cautious side.