Umbrella mileage expenses question.

[One Click Group]

Risk vs reward needs to be considered.

Lets look at what you can gain by switching umbrella (and I'm making some assumptions here):

You've reached 10k miles in about 8 months (Apr to Nov inclusive). That suggests to me that you are doing around 1,250 business miles per month.

There's 4 complete months from now to the start of the new tax year which means you might do 5,000 business miles between now and then. You could therefore gain tax relief on £1,000 (5k miles at 20p per mile).

So the actual gain could be between £200 and £400 dependent on your highest rate of tax.

Is that worth the risk?

[DirtyDog]

I have called my unbrella, and they've told be they don't know - hence my question here. I am aware of the two contracts point with an umbrella (read about that on this forum :-) so I'm setting up a quick temporary contract to keep everything above board. I don't believe there's any limitation on how long or short the second contract has to be.

If you are setting up a quick temporary contract with another umbrella, then you need to be working more than one contract with them and have worked more than one contract with the current umbrella, or you'll find that you fail the temporary workplace test with one or both.

If you are creating an artificial environment so that you minimize the tax that you pay, then you need to read up on the Ramsay principle to understand why that won't work.

There's nothing to stop you doing it, and there's a chance that you won't get caught for it. But if you're going to follow that line of thought, then the same applies to many other forms of crime.

[ASB]

If you are creating an artificial environment so that you minimize the tax that you pay, then you need to read up on the Ramsay principle to understand why that won't work.

I am sceptical as to whether they could apply Ramsay or not. Generally there are rather more precise pieces of legislation that are available to justify their approach.

There is a very good reason why HMRC don't just shout "Ramsay". It's difficult to make it stick.

If it had any easy sharp teeth it would rather have removed the need for IR35, BN66, S660 challenge and all sorts of other nasties.

[Contreras]

Risk vs reward needs to be considered.

Lets look at what you can gain by switching umbrella (and I'm making some assumptions here):

You've reached 10k miles in about 8 months (Apr to Nov inclusive). That suggests to me that you are doing around 1,250 business miles per month.

There's 4 complete months from now to the start of the new tax year which means you might do 5,000 business miles between now and then. You could therefore gain tax relief on £1,000 (5k miles at 20p per mile).

So the actual gain could be between £200 and £400 dependent on your highest rate of tax.

Is that worth the risk?

That depends on the risk.

HMRC chasing after umbrella employees? It's possible I guess but there would need to be other circumstances to trigger the enquiry as they have bigger fish to fry. And if the guidelines say you're not doing anything wrong then yeah the risk from HMRC is low.

So it boils down to whether you're happy with the current umbrella service and the 'risk' that the new umbrella turns out to be a bad choice. A bit like changing bank account for a higher savings rate.