Reply to: Equipment expenses while on inside IR35 contract

[Nut]

There are many, many reasons to not accept contracts that are inside IR35 and expenses is certainly one of them (especially since Chapter 10 was introduced and the 5% allowance ditched for anyone that falls within it). Strictly speaking, you are in exactly the same position as a regular employee w/r to tax relied on expenses but, sure, you are in a worse position from an engagement POV, because the client will effectively see you as a temp resource or contractor, but you certainly don't have the flexibility/freedom afforded to those of us that only stick with outside IR35 contracts. I also appreciate that you may not have that option, depending on your background/specialism.

Indeed, I dare say I will probably go back to ltdco once my two years are up, especially now that I am seeing green shoots regarding outside roles coming back up. Certainly for the last 18+ months i've seen next to no outside ones particularly in the industries I typically work in, so it's been either go inside or don't work. Whilst i've been grateful for the work i've certainly got one eye on moving back to the ltd way of working when I can.

[jamesbrown]

There are many, many reasons to not accept contracts that are inside IR35 and expenses is certainly one of them (especially since Chapter 10 was introduced and the 5% allowance ditched for anyone that falls within it). Strictly speaking, you are in exactly the same position as a regular employee w/r to tax relied on expenses but, sure, you are in a worse position from an engagement POV, because the client will effectively see you as a temp resource or contractor, but you certainly don't have the flexibility/freedom afforded to those of us that only stick with outside IR35 contracts. I also appreciate that you may not have that option, depending on your background/specialism.

[Nut]

Thanks all for the replies. I figured it would be a long shot getting any sort of allowances from hector!

Indeed the way this end client treats employees/contractors is a little odd. All permies are given laptops and any wfh kit they need. All third party suppliers are instructed to use their own kit (for other third party suppliers it would be their employers laptop, for inside ir35 contractors it effectively means your own personal kit) and log into the virtual desktop. Same as other stuff like permies provided a work phone (not that i'd want to carry one anyway), but inside contractors expected to supply your own.

So in this instance you're expected to supply your own kit to access their network. As well as any other kit you need to be set up from home (desk, monitors etc etc) although for most people at this point in the pandemic most people have a wfh setup. But the expectation is still there that you've supplied it all yourself since no one else in the chain is supplying anything for you. So it does somewhat feel like, as hmrc say, you are an 'employee for tax purposes only' as stuff like supplying kit which is provided to a permie, for inside contractors everyone just shrugs and says 'not my responsibility'.

[jamesbrown]

I think we're talking at cross-purposes as to what those EIMs say and mean, but it doesn't really matter because neither of us can be certain and we both seem to hold the same view about the likelihood of the OP being able to claim tax relief, i.e., not very likely (particularly given the new information supplied).

[eek]

If you read that closely, I think the situation is different - the baseline there is "no computer", i.e., no expense, it is not a slower computer provided by the employer. Otherwise, I think it would be inconsistent with the quote I highlighted. If a computer is essential for the performance of the duties and there is clear evidence that the employer requires the employee to pay, then it's probably fine, but that is a very narrow situation.

That was my entire point

Because no computer is being supplied but you need one for the contract EM36500 applies so you can't claim for it

And the other was that it's a pity because if you were given something completely dire EM36730 would apply and you could (potentially) claim for the purchase of a better one.

Mind you as all that is required is to connect to a remote desktop hosted elsewhere that latter argument wouldn't work in this case.

And yes. even in this case a significant fact was missing from the original post. Because the computer is merely used to connect to the work computer that exists elsewhere there isn't any justification to buy a better computer than the one you already have.

[northernladuk]

No what you’ve done here is made an assumption for a reasons I don’t know aside from just being argumentative?

Nope. We get a ton of 'can I do this' posts and they usually lack some important facts which we have to drag out of some people. You aren't but some people are liberal with the truth as they have an idea it's wrong but if they give us certain info they will get the answer they want. So with posts like this I like to dig a bit.

Situation is exactly as described in post 1. Started an inside role, client doesn’t provide kit at all (they actually provide a virtual desktop and expect you to rdp into it from your own machine). I bought a basic one to use seeing as my old one I still had left over from my days as Ltdco was literally falling apart, was wondering if it could be claimed as an expense as it is used for work purposes.

And that situation may affect the answer as it's not exactly what everyone is assuming. It's pretty different to usual questions which affects the answer, particulary in grey areas, which is why I like to dig a little in to these situations.

I don't know and Eek doesn't like me asking daft questions but what happens to the tax element if you only do part year at that gig and then go back outside or don't need it at the next client in that year? I'd also ask how much the saving is worth on a low cost laptop. Often many of these things really aren't worth the effort vs savings when you get down to the numbers, particularly if it's a complex or grey situation.

Can you push the chain harder if they haven't decided who is supplying one yet? Or is it a definite no?

[malvolio]

No what you’ve done here is made an assumption for a reasons I don’t know aside from just being argumentative?

Situation is exactly as described in post 1. Started an inside role, client doesn’t provide kit at all (they actually provide a virtual desktop and expect you to rdp into it from your own machine). I bought a basic one to use seeing as my old one I still had left over from my days as Ltdco was literally falling apart, was wondering if it could be claimed as an expense as it is used for work purposes.

In which case, no it can't. Apart from anything else, they are providing you with a machine, albeit a virtual one. How you get to it is with your own kit, which would be fully available to you personally. I know you can use business kit for personal use without HMRC taking any notice, but it doesn't really work the other way round. (And no doubt Hector would argue that you don't need your own machine, you can go to a library or an internet café).

I'm also assuming YourCo is no longer in existence, else it could perfectly happily buy its own and you could use it personally, again without any tax implications.

[Nut]

Yeah but he's made an assumption I don't think is right. Even nowadays very very few clients expect you to use your own kit and I don't think any clients take the govs statement to heart at all. We've seen next to no threads on expectations of own kit, regardless of IR35 status and I'd be very surprised if they start this bacause it's inside.

So if the OP thinks they need a laptop based on those assumptions I think he could be buying one he doesn't need which won't be wholly and exclusively.

No what you’ve done here is made an assumption for a reasons I don’t know aside from just being argumentative?

Situation is exactly as described in post 1. Started an inside role, client doesn’t provide kit at all (they actually provide a virtual desktop and expect you to rdp into it from your own machine). I bought a basic one to use seeing as my old one I still had left over from my days as Ltdco was literally falling apart, was wondering if it could be claimed as an expense as it is used for work purposes.

[northernladuk]

Once again - read the first post, the end client is NOT giving him any laptop and are expecting him to use his own.

Yeah but he's made an assumption I don't think is right. Even nowadays very very few clients expect you to use your own kit and I don't think any clients take the govs statement to heart at all. We've seen next to no threads on expectations of own kit, regardless of IR35 status and I'd be very surprised if they start this bacause it's inside.

So if the OP thinks they need a laptop based on those assumptions I think he could be buying one he doesn't need which won't be wholly and exclusively.

[jamesbrown]

All that said, the OP would probably need to speak to someone with real-world experience of this EIM/scenario (and knowledge of the OP's situation and employment contract) if they wanted to pursue it via a P87, but I think my initial instinct will be proven correct and it will not be allowed.

[jamesbrown]

My last point is based on this



from EIM36730 - Employment Income Manual - HMRC internal manual - GOV.UK (www.gov.uk)

So you can justify expensing something faster (I get more work done) but not if you don't have one.

If you read that closely, I think the situation is different - the baseline there is "no computer", i.e., no expense, it is not a slower computer provided by the employer. Otherwise, I think it would be inconsistent with the quote I highlighted. If a computer is essential for the performance of the duties and there is clear evidence that the employer requires the employee to pay, then it's probably fine, but that is a very narrow situation.

[eek]

On the one hand, it's a bit labyrinthine, yes. Otoh, I think we'd have heard about this before now if it worked, even though it's probably not common for an employer to fail to provide equipment that is essential to the performance of the duties.

Not sure about your second part, though, since the EIM says: "It is not enough for the taxpayer to claim that what the employer provides or will provide is inadequate."

Basically, I think the equipment would need to be essential and there would need to be something in the employment contract about the employee bearing the costs, something like that.

The situation described by the OP is more like he said/she said and the OP deciding to buy the equipment themselves in order to get some work done probably won't cut it. I think the OP will simply need to buy the equipment and not claim any tax relief.

My last point was based on this

A salesman who makes twice as many calls on clients as some of his colleagues will not have his allowable travel expenses restricted under Section 337 ITEPA 2003 on the grounds that the additional calls were not necessary. Similarly a saleswoman who purchases a computer to produce estimates at a rate faster than her colleagues should not be denied capital allowances on the grounds that she could have done her job without the equipment, provided that the tasks the computer performs are themselves an essential part of the duties.

from EIM36730 - Employment Income Manual - HMRC internal manual - GOV.UK (www.gov.uk)

So you can justify expensing something faster (I get more work done) but not if you don't have one.

And remember when a conversation gets down to between me and you it's usually the case of one of us has found the correct bit of minutiae to quote.

[jamesbrown]

I suspect EIM36500 - Employment Income Manual - HMRC internal manual - GOV.UK (www.gov.uk) is where the idea dies when you get to the second half of the first paragraph



If I read that correctly the laptop is required to perform the contract and therefore you can't claim for it as it's not performance enhancing.

Don't you love UK tax law, you can claim for a better laptop if the client gives you an ancient core2duo (provided it works) but you can't claim if they don't give you one at all.

On the one hand, it's a bit labyrinthine, yes. Otoh, I think we'd have heard about this before now if it worked, even though it's probably not common for an employer to fail to provide equipment that is essential to the performance of the duties.

Not sure about your second part, though, since the EIM says: "It is not enough for the taxpayer to claim that what the employer provides or will provide is inadequate."

Basically, I think the equipment would need to be essential and there would need to be something in the employment contract about the employee bearing the costs, something like that.

The situation described by the OP is more like he said/she said and the OP deciding to buy the equipment themselves in order to get some work done probably won't cut it. I think the OP will simply need to buy the equipment and not claim any tax relief.

[eek]

Yes, that looks like the right one. It seems doubtful to me that the OP would meet "necessarily provided for use in the performance of the duties". It is rare for an employer to require that an employee personally pay for equipment that is essential for the performance of their duties and I doubt the employment contract says anything about that. So, again, I think not. There were no doubt a bunch of these sorts of claims during the pandemic and the move to WFH, but I bet they didn't succeed (unlike the £6 per week, which is available to everyone WFH, without justification or receipts).

I suspect EIM36500 - Employment Income Manual - HMRC internal manual - GOV.UK (www.gov.uk) is where the idea dies when you get to the second half of the first paragraph

But substantial expenditure of this kind will not usually qualify for a deduction under Section 336 because it puts an employee in a position to perform the duties rather than being incurred in their actual performance.

If I read that correctly the laptop is required to perform the contract and therefore you can't claim for it as it's not performance enhancing.

Don't you love UK tax law, you can claim for a better laptop if the client gives you an ancient core2duo (provided it works) but you can't claim if they don't give you one at all.

[jamesbrown]

Suspect it's at EIM36730 - Employment Income Manual - HMRC internal manual - GOV.UK (www.gov.uk) - as you can see it gets complex quickly.

Yes, that looks like the right one. It seems doubtful to me that the OP would meet "necessarily provided for use in the performance of the duties". It is rare for an employer to require that an employee personally pay for equipment that is essential for the performance of their duties and I doubt the employment contract says anything about that. So, again, I think not. There were no doubt a bunch of these sorts of claims during the pandemic and the move to WFH, but I bet they didn't succeed (unlike the £6 per week, which is available to everyone WFH, without justification or receipts).