Reply to: Claiming expenses through PSC whilst working through Umbrella

[Lance]

Thanks for all the advice. Didn't realise it would spur so much discussion. It makes sense to only do some basic expensing if you absolutely need it for the business and wait till trading through the company for anything fancier, so I will behave myself.

I have a friend though who was planning to buy & expense a brand new MacBook in his final days of trading through his company in April!

If he's planning on closing the company what's he going to do with that asset?
It's legal and all, but not sure it could justify business use if he is about to cease trading entirely.
If the company is being retained then fine.

[PK2]

Thing is it's about giving a level of information that the OP can take away and action properly. We have to spend sometime chatting about it as everyones situation and level of knowledge is different. Craig's post nails it really but it doesn't help the OP understand the complexities of it and won't stop them running off and doing the wrong thing by not understanding.

What you say is absolutely correct but the key that is easily missed is 'wholly, exclusive and necessary for the purpose of the trade'. Your standard contractor that doesn't understand what they do won't get this so we chat about it. Nothing wrong with that. Yes your laptop comment is correct. It's necessary to keep his trade going but while they are not trading many other items are pushing it a little so it's quite correct to point this out. A 2k dev laptop and a new iphone is pushing it for a standard bum on seat contractor and if it attracts the wrong attention it could be disallowed. So if you don't need it, hang off until you do is wise advice.

You can go buy your £100k but you've got to be able to prove this if investigated. If that's what you are doing then go for it. Most of us don't.

Much of what has been said is just a pragmatic view on the situation err'ing on the side of caution. We've had accountants suggest it's best not to unless absolutely meets the criteria. The OP's opening question inidcates he thinks it's OK to carry on buying stuff as he wants it. That's not strictly true so we are chewing the fat with him.

If he'd asked can he buy a standard laptop then he would have got a positive response. If he'd wanted to upgrade his Iphone11 to 12 as it's nice and new he might have got a completely different answer. We don't know so he's getting everything, hairs split and all.

Sometimes it's better to try educate the OP's on the whole situation so they can go and think about it than give them a black and white answer that isn't true in all situations.

Thanks for all the advice. Didn't realise it would spur so much discussion. It makes sense to only do some basic expensing if you absolutely need it for the business and wait till trading through the company for anything fancier, so I will behave myself.

I have a friend though who was planning to buy & expense a brand new MacBook in his final days of trading through his company in April!

[Lance]

As it happens the reply was off topic.

I maintain its entirely inappropriate to promote a narrative that if you flip from out to in IR35 you automatically become liable for the past periods. It depends on so many factors that would require professional review and any half witted client and agent would have put in checkpoints to address the issue on the new contract.

it's

[northernladuk]

So much misinformation posted here and so many posters like splitting hair.

Its very basic, a LTD company is a totally standalone and separate legal entity to an individual who may or may not be inside IR35 but happens to be also the director of the company. Regardless if its trading or not, a LTD company can still have expenses such as IT equipments, accountants, admin, travelling and whatever else.

Just because the company don't have a client it does not mean it cant buy equipment. After all , how else are you going to do your end of year accounts and other submissions without equipment and look for other opportunities and so on.

So, If the company is not dormant, and has had revenue in the current tax year you can buy whatever equipment it needs for it to continue to pursue its trading and business objectives. Clearly no point spending money if cant be offset against revenue.

Go and spend £100k on racks of servers, who is to say as a director you are not setting the company up to provide cloud based solutions to potential future clients?

Thing is it's about giving a level of information that the OP can take away and action properly. We have to spend sometime chatting about it as everyones situation and level of knowledge is different. Craig's post nails it really but it doesn't help the OP understand the complexities of it and won't stop them running off and doing the wrong thing by not understanding.

What you say is absolutely correct but the key that is easily missed is 'wholly, exclusive and necessary for the purpose of the trade'. Your standard contractor that doesn't understand what they do won't get this so we chat about it. Nothing wrong with that. Yes your laptop comment is correct. It's necessary to keep his trade going but while they are not trading many other items are pushing it a little so it's quite correct to point this out. A 2k dev laptop and a new iphone is pushing it for a standard bum on seat contractor and if it attracts the wrong attention it could be disallowed. So if you don't need it, hang off until you do is wise advice.

You can go buy your £100k but you've got to be able to prove this if investigated. If that's what you are doing then go for it. Most of us don't.

Much of what has been said is just a pragmatic view on the situation err'ing on the side of caution. We've had accountants suggest it's best not to unless absolutely meets the criteria. The OP's opening question inidcates he thinks it's OK to carry on buying stuff as he wants it. That's not strictly true so we are chewing the fat with him.

If he'd asked can he buy a standard laptop then he would have got a positive response. If he'd wanted to upgrade his Iphone11 to 12 as it's nice and new he might have got a completely different answer. We don't know so he's getting everything, hairs split and all.

Sometimes it's better to try educate the OP's on the whole situation so they can go and think about it than give them a black and white answer that isn't true in all situations.

[northernladuk]

I thought if you were insideIR35 and via umbrella then you could claim nothing as expenses?

You can't. But he's asking if he can claim business expenses for his LTD which is running the background. Do keep up old chap

[luxCon]

While we're in pedant mode...

The company does not strictly have to have had revenue in the current tax year so long as the expense does not mean the company is trading insolvent (eg, by using retained profits). And, if that results in a loss, that loss can be carried back to the previous year (if that year had a profit) for a CT refund, or carried forward to a future year (if the expectation is for a profit).

Good point, I like your thinking

[Paralytic]

So, If the company is not dormant, and has had revenue in the current tax year you can buy whatever equipment it needs for it to continue to pursue its trading and business objectives. Clearly no point spending money if cant be offset against revenue.

While we're in pedant mode...

The company does not strictly have to have had revenue in the current tax year so long as the expense does not mean the company is trading insolvent (eg, by using retained profits). And, if that results in a loss, that loss can be carried back to the previous year (if that year had a profit) for a CT refund, or carried forward to a future year (if the expectation is for a profit).

[luxCon]

Mods don't judge the quality of information provided. There'd be no forum left if they did
They just judge whether it's on/off topic or abusive. This is why NLUK (and others) always offers sensible advice with the abuse.

As it happens the reply was off topic.

I maintain its entirely inappropriate to promote a narrative that if you flip from out to in IR35 you automatically become liable for the past periods. It depends on so many factors that would require professional review and any half witted client and agent would have put in checkpoints to address the issue on the new contract.

[Lance]

Entirely inaccurate and misleading advise based on ZERO information.

I'm surprised mods have not deleted this!!

Mods don't judge the quality of information provided. There'd be no forum left if they did
They just judge whether it's on/off topic or abusive. This is why NLUK (and others) always offers sensible advice with the abuse.

[luxCon]

Dont forget to pay the inside tax form start of your contract, not when you switch over to Umbrella

Entirely inaccurate and misleading advise based on ZERO information.

I'm surprised mods have not deleted this!!

[luxCon]

Hi there.

I was unfortunately classified to fall inside IR35 only a month after my start date on this new assignment, so will now have to switch to an Umbrella.

I very much wish to continue working through my PSC, maybe straight after this assignment ends, so planning to keep it active.

Question: I may not be able to claim any travel and subsistence expenses for this assignment anymore, but can I still carry on claiming things like IT equipment through my PSC if it remains active (even whilst not trading)? After all I am still using this equipment for my company admin, self-training and searching for potential new contracts (that'll hopefully be outside IR35).

Sorry if it's an obvious one.

So much misinformation posted here and so many posters like splitting hair.

Its very basic, a LTD company is a totally standalone and separate legal entity to an individual who may or may not be inside IR35 but happens to be also the director of the company. Regardless if its trading or not, a LTD company can still have expenses such as IT equipments, accountants, admin, travelling and whatever else.

Just because the company don't have a client it does not mean it cant buy equipment. After all , how else are you going to do your end of year accounts and other submissions without equipment and look for other opportunities and so on.

So, If the company is not dormant, and has had revenue in the current tax year you can buy whatever equipment it needs for it to continue to pursue its trading and business objectives. Clearly no point spending money if cant be offset against revenue.

Go and spend £100k on racks of servers, who is to say as a director you are not setting the company up to provide cloud based solutions to potential future clients?

[psychocandy]

I thought if you were insideIR35 and via umbrella then you could claim nothing as expenses?

[northernladuk]

Actually there was a clause about being able to substitute myself and some other things I don't remember exactly without looking at it again.

Working practices are key, not what is in the contract, particularly if that contract has been supplied by an agent. The client won't know what's in it and the agents will just splurge the same 'friendly' one over and over. Probably same you are direct. Who ever deals with you day to day on the client is unlikely to know or care what is in the contract.

Not knowing the key IR35 points in your contract is pretty poor as well.

[jayn200]

I disagree with most here and would think a laptop is probably fine if you need it. I wouldn't buy one if your business already owns one that is working fine, just wait to upgrade until you're back in contract, it's just a waste of money otherwise.

Since you're inside your client/employer is probably providing a laptop and all other IT equipment you need. If they aren't I would ask them too since they've assessed you inside.

Just use all your laptops for their own purposes. I have 3 laptops with me right now as is quite common (1 company, 1 personal, 1 client). It's good habit to use them for their designated purpose even if no one will ever verify it. It's good habit because you are less likely to accidently expose someone's or your own data or have some other incident. If you use 1 laptop for everything or you mix them up and just do whatever on each one then it's just messy.

[PK2]

How well to you really know IR35 to be able to say what factors affect your status? You've picked two that are pretty irrelevant so do you really know enough to say?

And you believe that?

Actually there was a clause about being able to substitute myself and some other things I don't remember exactly without looking at it again.