About to plunge into having my own ltd co. - questions

[TheCyclingProgrammer]

Everybody has pretty much covered it, but the process is quite simple:

1) You claim for any out-of-pocket expenses (travel, lunch, mileage etc.) from YourCo in accordance with HMRC expenses rules (e.g. the 24 month rule for travel/subsistence, specific rates for mileage). This is how you get your money back and the expense payment forms part of your company expenses.

2) Your company re-bills these expenses to the client according to the agreement between YourCo and the client (so in your case you've agreed to re-bill mileage at 10p per mile rather than the HMRC 40p per mile, and a flat rate of £5 a day for lunch etc.).

3) Important: when you re-bill these expenses, they form part of your overall service so if you are registered for VAT, you MUST charge VAT on the total value of the re-billed expenses. This includes any VAT on the original supply to you as well.

Example:

You purchase a train ticket for £12.50 (includes no VAT as train fares are zero-rated), some lunch (£3.50 for a sandwich) and you also claim for 10 miles at 40p per mile from YourCo (£4). You put in an expense claim and YourCo pays you back £20 for your out-of-pocket expenses.

You invoice company for the above expenses. You invoice them for lunch (at the agreed flat rate of £5 for the day), the train ticket and the mileage at the agreed rate of 10p per mile. Net invoice amount is (£5 + £12.50 + £1) £18.50.

If you are registered for VAT, you should charge VAT on the above amount, so the total amount invoiced is £21.74. The fact that a train ticket is zero-rated or that the other expenses may have included VAT already is irrelevant as you aren't supplying the client with a train ticket or food etc., you are invoicing them for your service which is always VATable.

Its worth noting that based on some of the posts on this forum, some clients (particularly agencies) have been known to get funny about charging VAT on top of expenses, claiming that you "cannot charge VAT on top of VAT". They are of course talking nonsense, you have to charge VAT on your re-billed expenses regardless of how you came to the net amount.

They can of course insist you strip the VAT on the original supply from the net amount of your invoice but this is between you and the client/agency; it would be equivalent to giving them a discount to the value of the original input VAT on the expense and if you are on the flat-rate scheme you end up losing out.

[TheCyclingProgrammer]

1. You do not have an employer when you have your own limited company.
2. All money coming in to your company is revenue.
3. You can only claim for what you actually spend.

1. Well, technically your own Ltd company can be your employer. It is your own company that you put in expense claims with.

3. Correct, when placing expense claims to your company, but you can bill the client for expenses at whatever rate you want and if the client has agreed to pay a flat rate of £5 a day for lunch then that is what you invoice them for.

[pipo]

Thank you all for your help.

[framework]

Heres the way i do this, with no problems so far.

1. Invoice clientco for days worked (weekly)
2. Send in expense claim for expenses which Myco has paid upfront (weekly)

This expense claim includes expenses at 40p per mile and any hotels and meals incurred that week.

3. Clientco then pays total of above amount into Myco account

4. Myco then pays me out 40p per mile for the mileage incurred

I don't see any problem doing things that way as you are only claiming once.
As the previous poster said, the arrangement between Myco and the client is totally separate from the arrangement between Myco and Me.

[VectraMan]

Becareful NOT to double claim the mileage though tempting as it maybe. It's fraud. If you are claiming 10p a mile from your office (home) to the client then you can't claim 40p off your tax as well as you have already been paid for it.

That bit confused me too.

Most of us get 0p from the client for mileage to the client's site, but personally claim 40p per mile from our Ltd. You could claim 10p per mile from your Ltd., and claim back the tax on the other 30p with your tax return, which perhaps is what Northernladuk meant, but that'd be stupid as you're in control of your Ltd's expenses policy.

Basically what goes on between you and your Ltd. is nothing whatsoever to do with what goes on between your Ltd. and client.

[northernladuk]

Yes, I hang my head in shame. You are right in that explaination.

[Paddy]

Becareful NOT to double claim the mileage though tempting as it maybe. It's fraud. If you are claiming 10p a mile from your office (home) to the client then you can't claim 40p off your tax as well as you have already been paid for it.

I believe you are wrong or I could be misunderstanding the situation.

If client pays 10p per mile for example 100 miles that is £10. That £10 is paid to the limited company an HMCR will treat that as income. The Limited Co. (or the contractor) will then claim 40p per mile (£40) back in tax. Don’t forget this is not a payment from HMCR; it is your money all you are doing is working hard to get £30 plus £10 expenses and not paying tax on it. 10p or even 40p per mile will not cover the costs of running your car for a mile; your client is getting cheap transport.

Accounts in way aforementioned way does not amount to double claiming. In a similar way my Barrister charges his client (me) £5 per mile, this for part of his income bit he can only claim 40p per mile back in tax. The remaining £3.60 is taxable. This is way I have dealt with mileage and how all other contractor I know deal with it.

[pipo]

Thanks for the comments/advice - i think it's slowly making some sense.

Cheers!

[northernladuk]

Hi all,

Please be gentle... I'm very much a newbie in all of this.

Happy to be gentle as long as you bothered to search the forums and put a bit of effort in. If not then it's open season on the noob!

The stuff you can claim back from the client you put in as part of your invoice and then claim it as an outgoing in your tax. That way it won't be considered as profitiable revenue.

The other stuff like the 40p you claim as an outgoing against your tax and just pay yourself that amount at the end of you pay period (or use a company credit card when filling up etc)

<section deleted as it was incorrect as pointed out below>

[Paddy]

Hi all,

Please be gentle... I'm very much a newbie in all of this. I'm about to start contracting and have decided to opt for my own ltd company as opposed to an umbrella.

My questions is on expenses. For my new job i will be reimbursed by the employer a certain amount on several things when i'm on site (for example, parking costs, toll fees, 10p per mile on mileage, £5 on lunch [round sum paid regardless of whether i paid £1.30 or £9.00], and so on).

Now technically, it will be my company (say Pipo Ltd) that will be claiming this from the employer (say Big Corp Ltd), so Pipo Ltd will be reimbursed those amounts as agreed with Big Corp Ltd. This is when it starts getting hazy for me: Can these amounts be claimed by Pipo Ltd as part of its business expenses? Presumably it is the Inland Revenue that this claim is made out to? And how do the lunch claims work, since these are fixed at £5 each time? (i think i know the answer to this, but i just need confirmation)

Also how do I claim, as (essentially) an employee of Pipo Ltd, the 40p per mile that is worth to me?

Hope this is all making sense. Thank you all in advance.

1. You do not have an employer when you have your own limited company.
2. All money coming in to your company is revenue.
3. You can only claim for what you actually spend.

[FarmerPalmer]

Pipo Ltd invoice Client Co for amounts as agreed with client co.
This is Pip Ltd's income.

You as employee submit expense claim to Pipo Ltd, based on inland revenue guidelines, and Pipo Ltd pay you these amounts.
This is Pipo Ltd expenses.

Any difference in these amounts in either profit or loss for Pipo Ltd

[pipo]

Hi all,

Please be gentle... I'm very much a newbie in all of this. I'm about to start contracting and have decided to opt for my own ltd company as opposed to an umbrella.

My questions is on expenses. For my new job i will be reimbursed by the employer a certain amount on several things when i'm on site (for example, parking costs, toll fees, 10p per mile on mileage, £5 on lunch [round sum paid regardless of whether i paid £1.30 or £9.00], and so on).

Now technically, it will be my company (say Pipo Ltd) that will be claiming this from the employer (say Big Corp Ltd), so Pipo Ltd will be reimbursed those amounts as agreed with Big Corp Ltd. This is when it starts getting hazy for me: Can these amounts be claimed by Pipo Ltd as part of its business expenses? Presumably it is the Inland Revenue that this claim is made out to? And how do the lunch claims work, since these are fixed at £5 each time? (i think i know the answer to this, but i just need confirmation)

Also how do I claim, as (essentially) an employee of Pipo Ltd, the 40p per mile that is worth to me?

Hope this is all making sense. Thank you all in advance.