Reply to: P4, NoLongerLimited, ParasolIT?

[boredsenseless]

It's pretty simple really...

If you haven't spent it don't claim it.

Why the **** should the rest of the country subsidise you getting £15 a day tax free. Yeah its a small amount but multiply that up by everyone doing it and its not trivial anymore.

Proof of spend isn't that arduous. If you always get a coffee from the same booth in the train station each day you'll know how much it costs, and as the person behind the counter will recognise you over time. This will suffice, HMRC won't like it but they'll accept it as 5 quid a day isn't what they really want to get out of you.

However - if you were a permie and you bought a coffee at a train station without a receipt would your boss allow you to claim it back. No didn't think so.

The cast iron test of whether something is expensable is whether or not a real business would have allowed you to claim it.

If the 5 quid a day tax free is so important just raise your rates by 3 quid an hour and you can then forget about it. Or put another way is 25 quid a week worth getting investigated for?

[Bradley]

Re:PIES

Taken from the IR website re: PIES

Employees are not required to produce receipts for any amount claimed within the prescribed limits and employers are not required to ask for them.

Remember this is for incidental expenses when staying away from home.

The subsistence limit of £15 is what Parasol have negotiated within their dispensation. This limit varies which each company. Again the important point is that you have to spend it to claim it.

Not quite the case I'm afraid. Although the HMRC Manuals say you don't have to get the receipts, HMRC can question your basis of making the payments without receipts. See http://www.hmrc.gov.uk/manuals/nimmanual/NIM06030.htm

[malvolio]

Well it's not one I've heard of. But surely if the purchase price is refunded, you have been given the shares as a gift and any subsequent income is subject to normal taxation as unearned income.

Usual rule applies - if it sounds too good to be true, it probably is. Don't ever forget these people are not after saving you money, they are after generating income from your fees (which are trivial) and the money they are handling on your behalf (which is not). So their advice is possibly a little skewed. Check with someone who has a professional qualification first!

[malandri]

NLL and 5% deduction

I had a chat with Robert from No Longer Limited. Very helpful guy. I asked him how does NLL manage to give better net compared to other umbrellas. I noticed that in his claculation, he was deducting an additional 5% amount, which was tax free. He explained as per below:

"With regards to the 5%, this is an additional 5% tax free income you receive operating through No Longer Limited. The way it works is you pay £10 for 100 shares in NLL, this £10 is fully refundable, you are then sent a share certificate which documents your 100 shares and you are then able to operate under the “Deemed Payment” solution. This is why our net returns are the best in the industry, we do not know why other organizations do not operate in this way, but it is the ACTUAL recommendation of the Inland Revenue or HM Revenue and Customs as it is now known."

Is this practice known to anyone of you. Any comments?

[rooney]

Pies

Taken from the IR website re: PIES

Employees are not required to produce receipts for any amount claimed within the prescribed limits and employers are not required to ask for them.

Remember this is for incidental expenses when staying away from home.

The subsistence limit of £15 is what Parasol have negotiated within their dispensation. This limit varies which each company. Again the important point is that you have to spend it to claim it.

[absoft]

£15 per day subsistence

Thanks for the advice. So is the concensus that £15 maximum per day can be claimed for subsistence providing I am away more than 10 hours and have recipts to prove my expenses? Seems a bit unreasonable to expect receipts for every incidental expense. After all at home I can have a cuppa for next to nothing; on the train station it can cost over a £1 and the vending machine does not give receipts. It would be much simpler if the IR agreed a set amount per day and that is what I thought the £15 was - wishful thinking I guess.

[Bradley]

I think you are getting mixed up here.

The ContractorUmbrella £5 is a PIES allowance (Personal Incidental expenses) that you can claim when staying overnight to cover such items as newspapers etc

The Parasol IT £15 is a subsistence allowance to cover food / drink etc.. when you have worked more than a set period of hours (10 I think in this case).

The PIE allowance still has to be receipted and has to be incurred to get it back. It is not a £5 a day allowance but a reimbursement of costs incurred.

[IR35 Avoider]

I suspect Parasol are telling you what they will allow and contractorumbrella are telling you what the Inland Revenue will allow. There is no conflict; Parasol won't ask you to show receipts for expenses up to £15 a day, but the Inland Revenue might if they ever investigate you.

Just because an umbrella doesn't ask to see receipts from small expenses doesn't mean you can do without them. People who simply pay themselves £15 a day (or whatever their umbrella or PSC decides to allow) without actually spending it on actual expenses are commiting the criminal offense of "cheating the Revenue" and can go to jail.

It seems the contractors who think they can falsely claims expenses have a special filter in their brains that filter out the words on every brollys web-site that says the expenses do have to be genuine. To be fair, they've probably be conned by the disreputable umbrellas (not Parasol and contractorumbrella) who make a big song and dance about expenses dispensations when in fact these make no difference to what you can claim as expenses.

[rooney]

£15 etc...

I think you are getting mixed up here.

The ContractorUmbrella £5 is a PIES allowance (Personal Incidental expenses) that you can claim when staying overnight to cover such items as newspapers etc

The Parasol IT £15 is a subsistence allowance to cover food / drink etc.. when you have worked more than a set period of hours (10 I think in this case). This has probably been agreed with the IR as part of a dispensation which means Parasol do not need to see the receipts but you would need to keep them AND of course only claim what you have spent. Any company can get a similar dispensation although the larger you are the more willing the IR is to negotiate.

It would appear that ContractorUmbrella have not got a dispensation but you should still be able to claim for subsistence expenses incurred as long as you provide the receipts.

So the answer to your question is that both are right!

[malvolio]

Quite posibly both.

Don't forget that in effect you work for an Umbrella and are therefore subject to their rules about what you can and can't do, and different companies may have different rules. That's the trade off against not having to do any of the boring stuff like wages and divdends calculations...

[absoft]

£15 per day or £5 overnight?

The point I am trying to make (maybe not very well) is that ParasolIT say I can claim £15 per day for every day I work away from my house for more than 10 hours. ContractorUmbrella say I can claim only £5 and to do that I have to be away overnight ! Only one of them is right; which is it?

[boredsenseless]

You can claim that amount unreceipted - in fact you can claim anything you like without receipts!!

The problem comes if HMRC get interested since they require proof you spent the money. This is usually in the form of receipts but can be anything such as a bank statement, empty sandwich box or even the shops CCTV if needs be.

The simple answer is if you haven't spent it don't claim it. If you can't prove it don't claim it

[absoft]

[QUOTE=malvolio]It's not that grey, really. If Parasol are willing to pay you £15 a day unreceipted, why is that a problem? All you have to do it declare it on your SA form as business expenses received. Hector may then tax you on it as BIK or he may not - if it's not extravagantly outside his guidelines, he probably won't.

What I am saying is why does ParasolIT (and also No Longer Limited) say I can claim £15 per day unreceipted because I am away from home for >10 hours when ContractorUmbrella on the other hand say I can't claim it? That is why its 'grey'; I don't know who to believe or whether I am allowed £15 tax free or not. If ParasolIT let me claim it, it is a problem if their advice happens to be incorrect and I end up with a fine; thats why its a problem !

[Bradley]

So how do you get a receipt for a per diem expense allowance - one for the coffee, one for the paper, one for the phone call home...??

The point is that Hector realises there is a cost for these minor incidentals incurred by working away from home (he has to, it's enshrined in all the Civil Service pay schemes, so he can't deny it to the real world) and that a reasonable amount of money can be paid each day (hence "per diem") to cover such expenditure, typically £5 for a day out, plus £10 if you stay overnight. It used to be called "beer and skittles" money, BTW

You can get receipts for most of what you've identified. You have to do it because you may stray into paying more than £5 on average in which case the whole amount becomes taxable. The incidental overnight expenses allowance as it is more properly called is not a defrayment of expenses but a maximum that can be paid. See http://www.hmrc.gov.uk/manuals/eimanual/EIM02730.htm for more detail.

[rooney]

Subsistence

To be fair to Parasol they don't actually sell their service on expenses like some umbrella companies do. This is taken from their site:

Parasol PLC operate a very attractive expenses policy that enables consultants using Parasol PLC's NetPay scheme to claim genuine business expenses in accordance with Inland Revenue Schedule E guidelines. Parasol PLC does have an expense dispensation from the Inland Revenue and this helps streamline the processing of claims and year end reporting. It does not provide carte blanche to claim lots of expenses without receipts, which some umbrella companies advertise as a sales "feature".