Reply to: Another promise of 85%!

[malvolio]

But Tarpon have explained to him that, as it says on their website,

( Look under "employee benefits, HMRC dispensation" ).

Entirely true, it does. Except that is for Tarpon's tax affairs, not the individual contractor's. Plus the dispensation, if it exists, has nothing to do with employee benefits and never will.

More evidence, if any were needed, that they are a bargepole mandatory environment...

[LisaContractorUmbrella]

But presumably the same rule still applies?

Only claim for what you've spent!

With this scheme the expense claim would be according to the scale rate - if you can prove you have spent more on lunch at a temporary location than you would have done at your permanent location you can claim whatever rate has been agreed. So, if the scale rate is £5 but you only spent £4.50 you would still claim £5.00. Conversely, if you haven't spent anything you can't claim anything.

[ilovehr]

But presumably the same rule still applies?

Only claim for what you've spent!

[LisaContractorUmbrella]

Hi Lisa

Could you explain something to me? What is the difference between a "scale rate" and a "benchmark dispensation". Springboard emailed me recenlty (see my other thread about 85% returns) and said they had "negotiated a fixed benchmark dispensation with HMRC".

Is this another way of describing a scale rate or do you think the guy who emailed me is telling porkie pies?

Hi Ilovehr

You are right, it is exactly the same thing - HMR&C explanation here:http://www.hmrc.gov.uk/briefs/income-tax/brief2409.htm

[ilovehr]

Hi Lisa

Could you explain something to me? What is the difference between a "scale rate" and a "benchmark dispensation". Springboard emailed me recenlty (see my other thread about 85% returns) and said they had "negotiated a fixed benchmark dispensation with HMRC".

Is this another way of describing a scale rate or do you think the guy who emailed me is telling porkie pies?

[Tingles]

To clarify the issue with scale rates: they were originally brought in by HMR&C themselves to save on paperwork. All their little inspectors were travelling about here there and everywhere and all put in receipts for £2.50 or £3.00 for lunch every day which amounted to a lot of receipts. To avoid this HMR&C stated that IF YOU SPENT MORE THAN YOU WOULD NORMALLY SPEND ON LUNCH when you were at a temporary location you could claim (I think it was) £4.95 per day and you would not need to present receipts. Therefore, if you took sandwiches for lunch every day and took sandwiches to a temporary location you could not claim. All HMR&C employees had to sign a disclaimer and fraudulent claims resulted in disciplinary action.

Dodgy umbrella's have taken this idea to the extreme and allow employees to claim up to £35 per day (comprised of breakfast, lunch and dinner). I understand in some cases that the claim is mandatory for each employee - hence the ridiculous take home pay claims. In the event of an investigation, the original premise would stand and the contractor would have to prove that they have spent on meals at their temporary location than they would have at a permanent location. This would be horribly difficult to do but, as we all know, the onus would be on the contractor to prove they were innocent rather than HMR&C having to prove they were guilty.

Yep, I caused a right stink with a very LARGE GIANTIC umbrella on here a couple of years ago for just the same issue.

Glad I went Limited.

[LisaContractorUmbrella]

To clarify the issue with scale rates: they were originally brought in by HMR&C themselves to save on paperwork. All their little inspectors were travelling about here there and everywhere and all put in receipts for £2.50 or £3.00 for lunch every day which amounted to a lot of receipts. To avoid this HMR&C stated that IF YOU SPENT MORE THAN YOU WOULD NORMALLY SPEND ON LUNCH when you were at a temporary location you could claim (I think it was) £4.95 per day and you would not need to present receipts. Therefore, if you took sandwiches for lunch every day and took sandwiches to a temporary location you could not claim. All HMR&C employees had to sign a disclaimer and fraudulent claims resulted in disciplinary action.

Dodgy umbrella's have taken this idea to the extreme and allow employees to claim up to £35 per day (comprised of breakfast, lunch and dinner). I understand in some cases that the claim is mandatory for each employee - hence the ridiculous take home pay claims. In the event of an investigation, the original premise would stand and the contractor would have to prove that they have spent on meals at their temporary location than they would have at a permanent location. This would be horribly difficult to do but, as we all know, the onus would be on the contractor to prove they were innocent rather than HMR&C having to prove they were guilty.

[ASB]

Don't duck, scale rates are entirely appropriate. It's abuse of scale rates that will cause problems and make HMRC take action. The only result of that is that one or two smart-arse providers will blow it for everyone.

Dammit. Do those yellow socks up. For once I can't even find anything to disagree with you about.

[malvolio]

[ducks for cover]
That is not strictly true. In the case of scale rates (which is different from a dispensation) then you can claim the scale rate provided you spent something. It seems as though some brollys might be moving towards scale rates, However the sampling regime is pretty stringent (the basic theory being it represent a general average). I do rather imagine that HMRC will be tightening up on scale rates (again) soon. It is only very recently they widened again who they were prepared to grant scale rates to.
[/ducks for cover]

Don't duck, scale rates are entirely appropriate. It's abuse of scale rates that will cause problems and make HMRC take action. The only result of that is that one or two smart-arse providers will blow it for everyone.

[ASB]

I was going to mention that, but thought I'd better not

HMRC are reviewing expenses allowed by umbrellas, so I wouldn't rely too much on scale rates and dispensations, to be honest.

It was only this year that they started to move scale rates into more general use (for UK based expenses). Though as somebody who spent almost 20 years overseas it was really quite useful to be able to claim the then FCO rates which is what were used for scale rates. Strangely the foreign and commenwealth office seemed to be quite generous. In Paris in 1990 I could claim almost 700 a week (legitimately) on subsistence. Plus the actual cost of flights. Blessed be the 24 hour rate...

Though I was always UK resident (and subject to some arcane tax rules in various countries) I paid rather less tax overall being UK resident than I would have done were I not.

[TheFaQQer]

[ducks for cover]
That is not strictly true. In the case of scale rates (which is different from a dispensation) then you can claim the scale rate provided you spent something. It seems as though some brollys might be moving towards scale rates, However the sampling regime is pretty stringent (the basic theory being it represent a general average). I do rather imagine that HMRC will be tightening up on scale rates (again) soon. It is only very recently they widened again who they were prepared to grant scale rates to.
[/ducks for cover]

I was going to mention that, but thought I'd better not

HMRC are reviewing expenses allowed by umbrellas, so I wouldn't rely too much on scale rates and dispensations, to be honest.

[ASB]

If you're not spending it you can't claim it, simple as!

[ducks for cover]
That is not strictly true. In the case of scale rates (which is different from a dispensation) then you can claim the scale rate provided you spent something. It seems as though some brollys might be moving towards scale rates, However the sampling regime is pretty stringent (the basic theory being it represent a general average). I do rather imagine that HMRC will be tightening up on scale rates (again) soon. It is only very recently they widened again who they were prepared to grant scale rates to.
[/ducks for cover]

[malvolio]

Some whle back, when we just beginning to get concerned about optimisitic expense policies, i spent a few hours unravelling Prosperity4's website. Buried in the depths of the small print was a line about the contractor needing to keep all receipts to prove expenditure in the event of a query.

[MarkOD]

to be fair the brollies do get a bad press and not always warranted, you're going to get bad apples in everything. i'm with one because i prefer the ease of use and my contract and working practice genuinly aren't outside of IR35. I've spoke to colleagues who are doing the whole salary/dividend split but haven't even heard about IR35 but say "my accountant says it's the most tax efficient way" which obviously it is but........... If you don't know if you're outside of IR35 then aren't you just as bad as a brolly who's telling you to claim certain expenses you might not be incurring a cost for?

[TheFaQQer]

If a contractor follows a dodgy umbrella's advice and claims a whole load of expenses they didn't incur, and that contractor gets caught by HMRC...wouldn't the contractor have a pretty good case against the umbrella?

Possibly - not sure exactly what law / tort applies though.

Surely the umbrella owes the contractor a duty of care, and if they've recommended claiming for expenses that weren't incurred, isn't that negligence?

I'm not sure - it's not as if they are accountants that you are paying for professional advice. If you work for a company, and someone there says "why don't you claim this" and you do (but shouldn't) - would you have a claim against your employer? Possibly, but I'm thinking probably not.

Or do the dodgy umbrellas simply train all their staff to be very careful about what they actually say, so it would always be argued that the contractor had simply misunderstood?

Try getting it in writing. Then you'll see the whole 85% unravel quickly!

Three questions to ask umbrella staff when they are talking about expenses and how much you can claim:

1) Are you sure?
2) Will you put that in writing?
3) Will you indemnify me against any legal action that HMRC might undertake against me, based on this advice?

Answers - "yes", "um, no, you don't need it in writing, trust me", "no. Click. <disconnected tone>"