First Time Contractor Questions

[LisaContractorUmbrella]

Yes, that's what I am told this morning by a brolly manager. They are required by law to keep around 16.50 per week towards my holiday pay. However, I can take out that money any time after first week. Does that sound alright?

folks, my client is offering me that I can submit my first invoice after two weeks for the first WHOLE month and then they can make efforts to get early payment. For the subsequent invoices, they can figure out from the first payment as to how long it takes. Basically the client is willing to help me as we have worked together in the past. But, it seems to be a difficult and long process to get legal team to change this in a large organisation. I hope that arrangement shouldn't have any tax/umbrella implications. I think, I am going to accept this as I can trust the person involved. Please share your view.

BTW, I am quoted around 110 (67.29 with tax relief) for the umbrella services. Does the price look OK? I am being told that I will need to submit receipts for travel expense (fuel, car maintenance), but I don't need to submit any receipts for subsistence (lunch) @ 9.50 per day.

I intend to start this week. Do I need to sort out LTD or brolly set-up before I start this week or I can do that within first weeks before my invoice is due?

The price that you have been quoted as 'with tax relief' will only apply if you are a higher rate tax payer (40%), it will be higher if you pay 20% tax. Also you should be aware that you cannot automatically claim £9.50 per day for lunch and, even though the umbrella company may not need receipts you should keep them. With regard to your IR35 status - if this is your first contract you really should have the contract assessed by an expert and you should also make sure that the contract is truly reflective of your working practises.

[Steven@Parasol]

BTW, I am quoted around 110 (67.29 with tax relief) for the umbrella services. Does the price look OK? I am being told that I will need to submit receipts for travel expense (fuel, car maintenance), but I don't need to submit any receipts for subsistence (lunch) @ 9.50 per day.


We would advise our contractors to always keep all their receipts as a matter of course.

Some umbrella's have special dispensations from HMRC which are to help keep the process of reclaiming legitimate expenses as streamlined and as efficient as possible. These dispensations shouldn't be abused but unfortunately some of the less scrupulous providers do.

Only claim for costs you have genuinely incurred and always keep your receipts.

[northernladuk]

B]

BTW, I am quoted around 110 (67.29 with tax relief) for the umbrella services. Does the price look OK? I am being told that I will need to submit receipts for travel expense (fuel, car maintenance), but I don't need to submit any receipts for subsistence (lunch) @ 9.50 per day.

I am sure you have just made generalisations and I am being a bit nit picky but I don't think car maintencance is a travel expense if it is your own car and 9.50 a day for lunch is a bit isn't it? If these are genuine comments I would seriously read up on expenses. Being allowable is one thing, being reasonable is another.

[Wanderer]

I don't think car maintencance is a travel expense if it is your own car and 9.50 a day for lunch is a bit isn't it?

Working in London, I could easily spend a tenner a day on lunch.

I agree with northernlad that car maintenance is most probably not allowable unless it's a company car.

What you would do is claim 40p per mile (for the first 10k miles per year, it's less after that). This has to cover maintenance, insurance, fuel, road tax, speeding tickets etc etc.

If you drive a 10 year old Ford Focus diesel then you're probably quids in. If you drive a BMW X5 with petrol V8 then you're going to be out of pocket.

110 is OK if that's monthly.

[dagenheis]

folks, my understanding is that 9.80£ or 40 pence per mile is the maximum I can claim. I intend to keep my subsistence (lunch) receipts even though I don't need to provide it to my brolly. And I don't 6-8 quid for a real lunch is a big deal although you can get Tuna sanwich for 1.20£.

@Wanderer, I am confused about your last comment that the car maintenance (e.g. service, tyres) are not included but you also mention that maintence insurace etc are included :s
I plan to ask my brolly to send me the list of expenses that can be claimed so that I have a clear idea.

BTW, could you please comment on remaining questions in my last post. It is much appreciated.

I tried to contact Parasol and Springboard, they haven't responded so far. I wanted to compare their prices although SpringBoard is offering me first free contract.

Has anybody recently used OrangeGenie? Is there anything I should get from a brolly before I sign up with them like any referrals, terms etc?

Many thanks

[northernladuk]

Working in London, I could easily spend a tenner a day on lunch.

I agree with northernlad that car maintenance is most probably not allowable unless it's a company car.

What you would do is claim 40p per mile (for the first 10k miles per year, it's less after that). This has to cover maintenance, insurance, fuel, road tax, speeding tickets etc etc.

If you drive a 10 year old Ford Focus diesel then you're probably quids in. If you drive a BMW X5 with petrol V8 then you're going to be out of pocket.

110 is OK if that's monthly.

I was just raising a bit of a warning flag rather than go through all the OP's outgoings. If he thinks car maintenance is allowable a good re-think and re-read of the documentation from his brolly is required. The one I started with had a pretty concise guide of what is and what isn't allowable...
And being even more pedantic I would say even though Wanderer can also joke about spending that I day I am still not sure it will go down well if you are trying to claim that day in day out. Occasioanlly maybe but it is it really worth raising a nice big target for HMRC to hit? I was of the understanding £5 was around the norm. Saying that I don't work in the big smoke so can't say if it is acceptable to raise this.

[LisaContractorUmbrella]

folks, my understanding is that 9.80£ or 40 pence per mile is the maximum I can claim. I intend to keep my subsistence (lunch) receipts even though I don't need to provide it to my brolly. And I don't 6-8 quid for a real lunch is a big deal although you can get Tuna sanwich for 1.20£.

@Wanderer, I am confused about your last comment that the car maintenance (e.g. service, tyres) are not included but you also mention that maintence insurace etc are included :s
I plan to ask my brolly to send me the list of expenses that can be claimed so that I have a clear idea.

BTW, could you please comment on remaining questions in my last post. It is much appreciated.

I tried to contact Parasol and Springboard, they haven't responded so far. I wanted to compare their prices although SpringBoard is offering me first free contract.

Has anybody recently used OrangeGenie? Is there anything I should get from a brolly before I sign up with them like any referrals, terms etc?

Many thanks

With regard to the expenses that you can claim - they are determined by HMR&C and not your brolly. The basic rule is that an expense has to be a cost that you personally have incurred purely because of the contract i.e. money that you wouldn't have to pay out if you weren't doing the contract. Your brolly cannot send you a list of expenses as everybody's circumstances are different. If you are travelling to the contract by car you can claim 40p per mile for the first 10,000 miles in any one year and 25p thereafter; this is designed to cover the running costs of the vehicle. Although as you say £8 per day is not a huge amount for a lunch out the £160+ it adds up to per month would be questioned by HMR&C if you were not incurring that cost - they tend to get upset if you claim £40 per week for subsistence if you are taking a packed lunch to work.

[Wanderer]

@Wanderer, I am confused about your last comment that the car maintenance (e.g. service, tyres) are not included but you also mention that maintence insurace etc are included :s

Sorry if it wasn't clear.

If you run a car, you can't claim anything at all for traveling by car expenses except for "40p per mile for the first 10,000 miles in any one year and 25p thereafter" (thanks Lisa) for business trips. This includes commuting from home to work for the first 2 years - see the "Two year rule" for more arcane rules on this.

As for expenses, if you go LTD you've got the The IR35 5% expenses rule where you don't have to provide any receipts or even spend the money. Now of course an umbrella is a completely different structure but surely if Hector is going to let this go for a LTD company then claiming less than 5% expenses (fully receipted and exclusively for business) through a brolly is going to pretty much keep you under Hector's radar?

I think we worry a bit too much about tiny details. Hector is in the numbers game, there are lots of us and a few of them. They will go for the big money and pick on a whole brolly company looking for evidence of systematic abuse, not sit there and suck their teeth arguing the toss over the price of a a tuna sandwich vs a ciabatta....

[Steven@Parasol]

folks, my understanding is that 9.80£ or 40 pence per mile is the maximum I can claim. I intend to keep my subsistence (lunch) receipts even though I don't need to provide it to my brolly. And I don't 6-8 quid for a real lunch is a big deal although you can get Tuna sanwich for 1.20£.

@Wanderer, I am confused about your last comment that the car maintenance (e.g. service, tyres) are not included but you also mention that maintence insurace etc are included :s
I plan to ask my brolly to send me the list of expenses that can be claimed so that I have a clear idea.

BTW, could you please comment on remaining questions in my last post. It is much appreciated.

I tried to contact Parasol and Springboard, they haven't responded so far. I wanted to compare their prices although SpringBoard is offering me first free contract.

Has anybody recently used OrangeGenie? Is there anything I should get from a brolly before I sign up with them like any referrals, terms etc?

Many thanks

Have a search on here and other forums and you'll get a really good feel for how all the different brollies are viewed by people. The same names do come up a lot for better or worse.

There are also lots of good independent umbrella guides out there too.

A correctly structured umbrella company should provide a complete professional employment service for contractors which will include a full contract of employment, HR support, guaranteed hours of work, invoicing and timesheet management, tax and National Insurance contributions (PAYE and NICs) and statutory HMRC notifications.

A good contractor focused umbrella will also issue invoices on your behalf, collect payments from clients/agencies, calculate tax and NI contributions and pay you your net pay direct to your personal bank account, without holding on to it.

Be wary of claims such as 'HMRC approved' or 'IR35 compliant'. HMRC does not approve or accredit companies so this doesn't actually mean anything. Neither does IR35 compliant in the context of umbrella companies as you will be taxed under normal PAYE as an employee.

Next, make sure you have a clear understanding of each umbrella's fee structure and identify any hidden costs such as a leaving fee. Does the umbrella charge you a fixed monthly or weekly fee or do they charge a percentage of your gross invoice value? What is included in the fee you are paying e.g. does it include professional indemnity or employer liability cover, etc?

Remember, even once you have signed up, if you aren't happy with the services you are receiving you always have the right to leave and move elsewhere.

Oh and if you want to PM me about who you tried to contact at Parasol I can give them a nudge.

[northernladuk]

And I don't 6-8 quid for a real lunch is a big deal

I do! For the sake of a couple of quid a day I would not be putting lunch in at this rate for love nor money. My own personal preference is to max it out at a fiver and thats it. Any more and I am quite happy to swallow the difference on the tax of a couple quid than paint a big HMRC Kick Me Here sign on my ass.

Allowable and reasonable are not always the same thing.