Reply to: Take Home Pay

[Lewis]

They didn't say that here. Hmmm. You've got me wondering now. I too have TLC35.

Yep, it's tricky. I can't decide myself. Am on Min Wage at moment but realise this is costing me extra taxes. Am happy to pay that if it means I am less likely to get investigated, but there is no evidence of this. It was almost easier when QDOS said you needed to pay Min Wage to have insurance!

[diesel]

Expenses - i always submit (or copies) or receipts to my accountant. they say they need to verify that the expense is genuine as part of their procedures. Suppose better to be safe & honest than sorry.

A question - if one does mileage for client say to visit another site. And you fill in the client expense sheet say for 50miles claimed as personal mileage to my LTd co (40p/mile+VAT). Sometimes they ask me for petrol receipts, before they did not. I reply saying i do not have a receipt just for 50miles worth of fuel, plus i need the original receipt to show my accountant to claim the expense back from my Ltd Co. The last time the expenses administrator at the client put her own fuel receipt for me, which was kind but she should have told me.

What do others do in such circumstances?

BUMP for response!

[diesel]

Interesting to note the differences in how contractors pay themeselves between min.wage and directors fee.......there does not seem to be a definite answer on which is better.

Although i do agree that the HMRC would probably make a bigger case to go after a LTD co which could be liable more tax in the region of £'000s than just a few hundered.

Expenses - i always submit (or copies) or receipts to my accountant. they say they need to verify that the expense is genuine as part of their procedures. Suppose better to be safe & honest than sorry.

A question - if one does mileage for client say to visit another site. And you fill in the client expense sheet say for 50miles claimed as personal mileage to my LTd co (40p/mile+VAT). Sometimes they ask me for petrol receipts, before they did not. I reply saying i do not have a receipt just for 50miles worth of fuel, plus i need the original receipt to show my accountant to claim the expense back from my Ltd Co. The last time the expenses administrator at the client put her own fuel receipt for me, which was kind but she should have told me.

What do others do in such circumstances?

[original PM]

In a permie job I had mileage claims had to be accompanied by petrol VAT receipts of 50% of the amount being claimed. Permiedom HR said it was a requirement from HMRC to validate the claim.

Its VAT receipts they want - so they can claim the VAT back.

[Fred Bloggs]

Yes and if you pay yourself this lower salary then your excess goes up to reflect the fact they consider there is more chance of an investigation. I have the TLC35 product myself and have spoken to them about this.

They didn't say that here. Hmmm. You've got me wondering now. I too have TLC35.

[Beefy198]

For the sake of keeping a piece of paper though....

(Although to be fair you could just produce your bank account statements showing petrol station top ups)

[Unicorn]

Permie Expenses

In a permie job I had mileage claims had to be accompanied by petrol VAT receipts of 50% of the amount being claimed. Permiedom HR said it was a requirement from HMRC to validate the claim.

Never bothered to question whether HR's intepretation was correct as the receipts could be dated from before or after the claim date and didn't have any car reg numbers on so you could use anybody's. Bit of a pointless exercise all raound.

[Churchill]

TBH I'm thinking more along the lines of a ltdco in the event one's expenses is queried. I would have thought having petrol receipts would at least support the mileage claim. E.g. some work from home and are no doubt tempted to claim the mileage anyway.

QB.

Ah, I wasn't. Umbrella companies don't ask for petrol receipts.
(Note. Not the ones I used to work through.)

[QwertyBerty]

Nope.

You're claiming mileage, not for petrol.

TBH I'm thinking more along the lines of a ltdco in the event one's expenses is queried. I would have thought having petrol receipts would at least support the mileage claim. E.g. some work from home and are no doubt tempted to claim the mileage anyway.

QB.

[Churchill]

May Hector not request to see your petrol receipts?

QB.

Nope.

You're claiming mileage, not for petrol.

[QwertyBerty]

You could always lie about your mileage. Say for example, you stay away from home four nights a week as your client is 180 miles away. You pay £25 a night for a B&B. Don't claim for the B&B, claim for the 360 miles per day commute...

May Hector not request to see your petrol receipts?

QB.

[Churchill]

There has been quite a lot of chat on the board, over the last few months, about the percentage take home pay that can be 'achieved' using different umbrella companies, EBTs, limited company etc etc.

As things stand at the moment, if you do not want to attract any undue attention from HMR&C, you basically have 2 options available to you - an umbrella company or your own limited company. However, if your contract is inside IR35, you will receive payment via PAYE regardless of which option you take.

If you are paid via PAYE you will be liable for income tax and national insurance contributions. Your earnings up to £34,800, less your tax free allowance, will be taxed at 20%; everything above this will be taxed at 40%. National insurance rates are 11% for employee's and 12.8% for employer's on earnings above £105 per week.

So, assuming you are a contractor earning, say, £300 per day how on earth do you take home 85 or 90% of your earnings??? Good question. The answer is that you can't without offsetting the vast majority of your tax liability. There are several ways of doing this:

You can put everything over minimum wage into a pension scheme - this option will leave you next to nothing to live on for the next 20 or so years but you should be reasonably well off after that.

You can claim expenses. To use our example of earnings of £300 - to net 85% of your earnings you would need to claim over £800 in expenses each and every week. Whilst this is possible it is unlikely as you would be working for £700 gross a week rather than £1500 gross as your outgoings would be over £800. Of course you would get tax relief on the expenses but you would still have spent that money in the first place.

So, schemes that promise 80-90% take home can actually offer that but only if your expenses are at the sort of level shown above. If your gross earnings are £300 per week and you work 25 miles from home and don't want to invest in a pension you will not net 80-90% - if you do please expect a visit from one of the lovely chaps at the HMR&C sometime soon.

HTH

You could always lie about your mileage. Say for example, you stay away from home four nights a week as your client is 180 miles away. You pay £25 a night for a B&B. Don't claim for the B&B, claim for the 360 miles per day commute...

Oh yes!

[MPwannadecentincome]

If you are paid via PAYE you will be liable for income tax and national insurance contributions. Your earnings up to £34,800, less your tax free allowance, will be taxed at 20%; everything above this will be taxed at 40%. National insurance rates are 11% for employee's and 12.8% for employer's on earnings above £105 per week. HTH

Actually to be fair on the PAYE illustration and to keep things in perspective, there is an UPPER limit on the EMPLOYEE National Insurance - I think the currect figure is around £40,000 per annum, above that limit the NI rate is 1%.

I agree with the general point of the post though - trying to get 80% + is risky - I am now being hassled by a company called "Sunday" to evaluate their services...

[Lewis]

They (QDOS) have lowered their minimum salary requirement to (IIRC) £6k. There are a couple of posts here from QDOS saying exactly this if you search for QDOS posting. I intend to do this from April 6th. I'm currently paying £10k salary but I now see no reason to do so.

Yes and if you pay yourself this lower salary then your excess goes up to reflect the fact they consider there is more chance of an investigation. I have the TLC35 product myself and have spoken to them about this.

[LisaContractorUmbrella]

I'm slightly disappointed with the original post.

We all know that if you go through an umbrella company, then using their magic dispensation, you can claim what you want with no receipts needed, so you can just maximise your income that way - claiming expenses without needing any receipts (or even spending the money!) is the way forward, surely?

Shame on you, Lisa, for forgetting to highlight how the magic dispensation works for umbrellas!

Sorry FaQQer Of course I should have explained about the magical dispensation - just mention it when HMR&C come calling. I am sure that one of them will explain - there is no Harry Potter, no invisibility cloaks and no magical dispensations - they may pat you on the head at this point.