Reply to: 24 month confusion

[MrMarkyMark]

A consultancy would never 'expect' an employee to be on a customer's site for that long. If only for tax reasons.
And if they did they'd have to pay employee a relocation bonus.

HMRC presumably can't be arsed getting into that argument with these boys.

The one the Mrs did a fair amount of time with, they always moved her around within the two year period.

[malvolio]

Outside of IR35, tax rules are the same for contractors as permies. You are a permanent employee of your own company.

No I'm not. I'm an officer of my company and take a salary as a result. I am not by any definition an employee.

As for training, it;s also the same, the company can pay for training and if for example it was an MBA then HMRC would come looking for BIK tax from the employee.

They might well do, but an MBA is a personal qualification an doesn't directly benefit their employers (or anyone else in reality, but let's not go there...) Converting a coder to a new language or training your network team to use your new Cisco kit or teaching your PMs sales skills benefit the company as a whole so do not represent a BIK.

[Lance]

Remember this is when you are 'expected to be' as well. If the consultancy wins a 5 years deal then they've got to expect this hits from day one for much of the resource allocated.

A consultancy would never 'expect' an employee to be on a customer's site for that long. If only for tax reasons.
And if they did they'd have to pay employee a relocation bonus.

HMRC presumably can't be arsed getting into that argument with these boys.

[TheCyclingProgrammer]

But this is driven by a tax rule isn't it? The company can still reimburse them whatever they want. If a permie incured a 59 quid expense his employer can still give him his 59 quid back.

But if the employer reimburses travel expenses to an employee who is caught by the 24 month rule, any reimbursements are subject to tax and NI on the employee. Nothing stopping the employer from reimbursing a higher gross amount of course, so the net reimbursement equals the employees expense (the employer is then effectively absorbing the cost of the tax hit).

[northernladuk]

Not that simple. They can increase the permie's salary to cover their additional costs, with the same overheads as any other salary package. That's just another operating cost overhead and would obviously be subject to a proper cost/benefit analysis but there's not reason not to do it.

However they have multiple strings to the business and multiple roles within it. It is very easy for them to argue that, for example, training an employee in a given technology or a new skillset, is all part of their overall business and so is fully deductible. Hence all such costs are offset against CT. Since we have only two or three discrete skills as part of our business - and most have only one - we can't use that justification.

OK so we are looking at two different things then. I was picking up on the point made that employee's can't claim their expenses back. This is wrong because they can, they don't care how but they get their expenses in one form or another. The comments after that were talking about the business cost and tax treatment of that, which yes, is different and more expensive.. but the employee still get's his money back.

Surely a decent consultancy would know this is coming and have factored this in through the agreement with their client. They don't just hit a wall at 2 years and start flailing about surely? That's got to be bad business. Remember this is when you are 'expected to be' as well. If the consultancy wins a 5 years deal then they've got to expect this hits from day one for much of the resource allocated.

[MrMarkyMark]

But this is driven by a tax rule isn't it? The company can still reimburse them whatever they want. If a permie incured a 59 quid expense his employer can still give him his 59 quid back. Might cost the employer more cause he can't claim the tax but it's still a cost of doing business?
Same with training on new skills that are new skills so don't meet the HMRC criteria. The business can still pay for it whether they can claim tax or not?

They can, but it is one of the reasons that the consultancies will only have someone on site for 2 years, in most circumstances.
They usually shunt them around all over the place to keep that tax benefit.

[Lance]

Not that simple. They can increase the permie's salary to cover their additional costs, with the same overheads as any other salary package. That's just another operating cost overhead and would obviously be subject to a proper cost/benefit analysis but there's not reason not to do it.

However they have multiple strings to the business and multiple roles within it. It is very easy for them to argue that, for example, training an employee in a given technology or a new skillset, is all part of their overall business and so is fully deductible. Hence all such costs are offset against CT. Since we have only two or three discrete skills as part of our business - and most have only one - we can't use that justification.

Outside of IR35, tax rules are the same for contractors as permies. You are a permanent employee of your own company.
As for training, it;s also the same, the company can pay for training and if for example it was an MBA then HMRC would come looking for BIK tax from the employee.

[malvolio]

But this is driven by a tax rule isn't it? The company can still reimburse them whatever they want. If a permie incured a 59 quid expense his employer can still give him his 59 quid back. Might cost the employer more cause he can't claim the tax but it's still a cost of doing business?
Same with training on new skills that are new skills so don't meet the HMRC criteria. The business can still pay for it whether they can claim tax or not?

Not that simple. They can increase the permie's salary to cover their additional costs, with the same overheads as any other salary package. That's just another operating cost overhead and would obviously be subject to a proper cost/benefit analysis but there's not reason not to do it.

However they have multiple strings to the business and multiple roles within it. It is very easy for them to argue that, for example, training an employee in a given technology or a new skillset, is all part of their overall business and so is fully deductible. Hence all such costs are offset against CT. Since we have only two or three discrete skills as part of our business - and most have only one - we can't use that justification.

[Lance]

But this is driven by a tax rule isn't it? The company can still reimburse them whatever they want. If a permie incured a 59 quid expense his employer can still give him his 59 quid back. Might cost the employer more cause he can't claim the tax but it's still a cost of doing business?
Same with training on new skills that are new skills so don't meet the HMRC criteria. The business can still pay for it whether they can claim tax or not?

well yes. But if they pay the employee more than they're entitled to they'll have to pay tax. IE. It will either be a straight PAYE 'bonus' or go on the P11d as a BIK.

[northernladuk]

But this is driven by a tax rule isn't it? The company can still reimburse them whatever they want. If a permie incured a 59 quid expense his employer can still give him his 59 quid back. Might cost the employer more cause he can't claim the tax but it's still a cost of doing business?
Same with training on new skills that are new skills so don't meet the HMRC criteria. The business can still pay for it whether they can claim tax or not?

[MrMarkyMark]

If you work for a consultancy and are put on a project elsewhere that lasts longer than 2 years you can't claim expenses.

Yep +1

[malvolio]

Oddly enough PC is right.
Temporary workplace definitions (2 years, 40%) are just as valid for permies.

Correct. Although I would put it as the rules were put in place for permies and we get caught by them...

[Lance]

What do you mean permies can no longer claim expenses? That doesn't make sense.

Oddly enough PC is right.
Temporary workplace definitions (2 years, 40%) are just as valid for permies.

[pr1]

What do you mean permies can no longer claim expenses? That doesn't make sense.

permies have the 2 year rule for temporary workplace too

[SueEllen]

What do you mean permies can no longer claim expenses? That doesn't make sense.

If you work for a consultancy and are put on a project elsewhere that lasts longer than 2 years you can't claim expenses.