allowable expenses after 24 months

[LisaContractorUmbrella]

To be fair to Steve an umbrella company has to rely on the information that they are provided with; our systems would flag a contract that had been drafted to extend beyond 24 months. Obviously in these circumstances the 24 month rule would not have been broken due to time spent on the site but we would need to be notified of the fact to make that assertion.

[NotAllThere]

It's not our rule, we can only apply the rules set out by HMRC.

It's your misapplication of the rule though, isn't it.

[escapeUK]

The rules set out by HMRC in EIM32080 say "The test is whether the employee has spent, or is likely to spend, 40% or more of his or her working time at that particular workplace over a period that lasts, or is likely to last, more than 24 months"

So for the somewhat unusual case of "4 days of work in 24 months", HMRC's 24 month/40% rule fails on the 40% test...

I was typing this out, but then stopped as I realised I couldnt bother arguing with them over their failure to be helpful or really understand the rules. Thank you though. I could give a few other instances of their attitude, but this would be off topic.

I dont find it unusual, Im a real contractor who has a lot of industry contacts who sometimes need me for a few months, other times a few weeks. Some even pay me £500 a day just to install a laptop for someone important (like the CEO) as they know I can be trusted with whatever information I come across.

[Wanderer]

It's not our rule, we can only apply the rules set out by HMRC.

The rules set out by HMRC in EIM32080 say "The test is whether the employee has spent, or is likely to spend, 40% or more of his or her working time at that particular workplace over a period that lasts, or is likely to last, more than 24 months"

So for the somewhat unusual case of "4 days of work in 24 months", HMRC's 24 month/40% rule fails on the 40% test...

[Steven@Parasol]

That took me back!!! In the bad old days when I was with Parasol I had one client who used me for maybe 1 day every 6 months. When she came to book me again it turned out the old contract had expired. So to avoid this problem she changed the expiry date well into the future. This triggered Parasol to tell me I could no longer claim expenses on this contract.

Cus obviously 4 days of work in 24 months has broke the 24 month rule according to them. hahahaha

It's not our rule, we can only apply the rules set out by HMRC.

[escapeUK]

Just to add to what has already been discussed, the two year rule applies as soon as you know your contract will last longer then 24 months.

So if you are on 12 months and you know that you are getting a 12 month extension then the rule still stands.

That took me back!!! In the bad old days when I was with Parasol I had one client who used me for maybe 1 day every 6 months. When she came to book me again it turned out the old contract had expired. So to avoid this problem she changed the expiry date well into the future. This triggered Parasol to tell me I could no longer claim expenses on this contract.

Cus obviously 4 days of work in 24 months has broke the 24 month rule according to them. hahahaha

[Steven@Parasol]

Just to add to what has already been discussed, the two year rule applies as soon as you know your contract will last longer then 24 months.

So if you are on 12 months and you know that you are getting a 12 month extension then the rule still stands.

[philip@wellwoodhoyle]

WHS

Do the vast majority of contractors think that Hector is going to go through the list of telephone calls they've made on their mobile phones and conclude their personal or that Big Mac is some kind of tax avoidance? Sadly yes. I am continue to be amazed at how people get worried over this.

Claim it all back your entitled and if you make a small mistake and you get auditted(tiny chance of
that) then you ain't going to be sharing a cell with a sterioded version of Mr T who ain't seen a women in 20 years.

Says someone who's never been at the receiving end of a tax enquiry I would wager! HMRC have been lacking over recent years in not actually doing many enquiries, hence the general assumption that it's a very small risk of ever being enquired into. Sadly, that's changing now, with the new compliance visits. Today's there's more chance than in the past decade of a business receiving a compliance check. And yes, they do pick on tiny things and then explode them out of all proportion if they've a mind to do so.

A tax specialist recently told me about a case of his where the tax inspector had disallowed all motoring costs because the client (an electrician) hadn't kept a mileage log. The inspector accepted that some business mileage must have occurred (it was common sense) but in the absence of a mileage log, he refused any motoring cost claims at all, and issued an increased tax demand together with a hefty penalty for "carelessness" in his accounts and tax return!

Just because HMRC haven't been out much in the past few years doesn't mean they aren't out and about now and they do have plans to increase the number of compliance visits. They're starting to get aggressive!

They are also more than happy to "waste" time on small things. I once had a client enquiry where they wanted explanations for tiny amounts paid into a bank account of less than a tenner, trying to make out they were either business income, or transfers from undeclared bank accounts - took a hell of a lot of time and effort to get explanations from the client and persuade the tax inspector they were nothing untoward!

A few years earlier, I was involved in a case where that kind of detailed enquiry led to a big under-declaration - the client closed down an old bank account and transferred the balance of about a fiver to his business account. Tax inspector picked it up and demanded sight of all statements from the old, closed account, which unfortunately was the guy's "back pocket" money where he'd been running a shadow business for several years. Very nearly landed him with a criminal conviction and all for a fiver!

[JamJarST]

WHS

Do the vast majority of contractors think that Hector is going to go through the list of telephone calls they've made on their mobile phones and conclude their personal or that Big Mac is some kind of tax avoidance? Sadly yes. I am continue to be amazed at how people get worried over this.

Claim it all back your entitled and if you make a small mistake and you get auditted(tiny chance of
that) then you ain't going to be sharing a cell with a sterioded version of Mr T who ain't seen a women in 20 years.

You do know how it works if they find a small mistake? The take a sample of expenses, say 1 month, or 1 week and look for errors. When they find them they put a % value on them and apply that to the whole years receipts.

[MarillionFan]

HMRC know that vending machines, chips shops and local cafes dont give them out though. I doubt they really care as much as contractors think they do. When you are invoicing £400-500 a day do you really think they care about the tax on a fiver? Charging you that juicy two lots of NI is of much more interest I bet.

WHS

Do the vast majority of contractors think that Hector is going to go through the list of telephone calls they've made on their mobile phones and conclude their personal or that Big Mac is some kind of tax avoidance? Sadly yes. I am continue to be amazed at how people get worried over this.

Claim it all back your entitled and if you make a small mistake and you get auditted(tiny chance of
that) then you ain't going to be sharing a cell with a sterioded version of Mr T who ain't seen a women in 20 years.

[escapeUK]

Also - you still need to actually spend the money. You can't claim £5 for a lunch you didn't have. You need to keep receipts in case HMRC come knocking.

HMRC know that vending machines, chips shops and local cafes dont give them out though. I doubt they really care as much as contractors think they do. When you are invoicing £400-500 a day do you really think they care about the tax on a fiver? Charging you that juicy two lots of NI is of much more interest I bet.

[srk]

Thank you for the link and replies

[mudskipper]

With most umbrella companies a contractor can claim additional allowances.
These include £5 breakfast allowance if bought before 07:00, £7.50 lunch allowance for working full day, evening meal allowance if working over 10 hours,
£3 a week use of home as office allowance. Are these still allowed or disqualified after 24 months, also who determines the rate of these allowances because for example My Keypay offer £5 for breakfast whereas Danbro offer £6.50.

I assume other allowances like personal incidental expense, eyesight test, overnight stay or travelling on business to other client sites are still allowable. Can
someone confirm

Thank you

Also - you still need to actually spend the money. You can't claim £5 for a lunch you didn't have. You need to keep receipts in case HMRC come knocking.

[NotAllThere]

It's really very simple. After 24 months* expenses connected with the journey between home and the location of the work are not claimable. That's accomodation, travel costs and food - and incidental expenses.

Any expenses associated with any other travel, remains claimable, as does any other allowable expense.

This is true for permies, ltdco contractors, and brolly subscribers. The 24 month rule has been discussed at length - so has what's claimable. See here for example: http://forums.contractoruk.com/accou...g-via-ltd.html


*Ignoring complexities of part-time work at one place.

[srk]

With most umbrella companies a contractor can claim additional allowances.
These include £5 breakfast allowance if bought before 07:00, £7.50 lunch allowance for working full day, evening meal allowance if working over 10 hours,
£3 a week use of home as office allowance. Are these still allowed or disqualified after 24 months, also who determines the rate of these allowances because for example My Keypay offer £5 for breakfast whereas Danbro offer £6.50.

I assume other allowances like personal incidental expense, eyesight test, overnight stay or travelling on business to other client sites are still allowable. Can
someone confirm

Thank you