Reply to: Overnight Subsistence

[The Spartan]

Yes, this is our process - we don't need to see all receipts as we have a dispensation (like most brollies) but I think it is best practise to carry out spot checks

It's comforting to hear

[LisaContractorUmbrella]

I gather you have a similar process or do you ask all your contractors to submit all their receipts?

Yes, this is our process - we don't need to see all receipts as we have a dispensation (like most brollies) but I think it is best practise to carry out spot checks

[The Spartan]

All umbrella companies should perform random checks on their employees to ensure that they are not claiming expenses to which they are not entitled, so, every so often, you should be asked to supply the supporting documentation for your expense claims i.e receipts or proof of expenditure

I gather you have a similar process or do you ask all your contractors to submit all their receipts?

[LisaContractorUmbrella]

I have all my receipts and I keep them all, what I am asking is should they (my umbrella company) be requesting them all?

All umbrella companies should perform random checks on their employees to ensure that they are not claiming expenses to which they are not entitled, so, every so often, you should be asked to supply the supporting documentation for your expense claims i.e receipts or proof of expenditure

[malvolio]

I have all my receipts and I keep them all, what I am asking is should they (my umbrella company) be requesting them all?

No idea. Only they can answer that.

[The Spartan]

What would stop you (for example) claiming a £2000 laptop and never buying one? In the event of an audit, how can you show that you incurred the expense?

Just because your employer doesn't want to see your receipts doesn't mean that HMRC doesn't want to see your receipts.

I have all my receipts and I keep them all, what I am asking is should they (my umbrella company) be requesting them all?

[TheFaQQer]

Ok I'm a little confused, I do keep all my receipts but the only ones I have to submit to my umbrella company to process my expenses are: Fuel, Sundry Expenses and Travel.

Should they be asking for all my receipts, I know of some other contractors that use umbrella companies that insist on it.

If you are claiming something from your employer, you need to have a receipt. If HMRC do an audit of you (and it will be you personally that's responsible rather than the employer), then how can you prove that the expense you submitted to the company ever occurred?

What would stop you (for example) claiming a £2000 laptop and never buying one? In the event of an audit, how can you show that you incurred the expense?

Just because your employer doesn't want to see your receipts doesn't mean that HMRC doesn't want to see your receipts.

[The Spartan]

Nope.

Dispensation means that the employer does not need to declare certain expenses on a P11D.

It does not mean that the employee does not need to keep the receipt proving that they incurred the expense that they are claiming for.

Ok I'm a little confused, I do keep all my receipts but the only ones I have to submit to my umbrella company to process my expenses are: Fuel, Sundry Expenses and Travel.

Should they be asking for all my receipts, I know of some other contractors that use umbrella companies that insist on it.

[TheFaQQer]

I believe it comes under their dispensation

Nope.

Dispensation means that the employer does not need to declare certain expenses on a P11D.

It does not mean that the employee does not need to keep the receipt proving that they incurred the expense that they are claiming for.

[The Spartan]

My accountant told me that the only expenses that receipts are not expected by HMRC are the overnight allowance of £5/night and my mileage claims.

I believe it comes under their dispensation

[malvolio]

My accountant told me that the only expenses that receipts are not expected by HMRC are ....my mileage claims.

...and only if you keep a log of journeys made.

[Waldorf]

When I contacted them they told me that though some items can be unreceipted you still have to keep the receipts for them.

My accountant told me that the only expenses that receipts are not expected by HMRC are the overnight allowance of £5/night and my mileage claims.

[The Spartan]

I agree tho - if your paying an umbrella they should be doing all this for you or should have a dispensation.

When I contacted them they told me that though some items can be unreceipted you still have to keep the receipts for them.

[Clare@InTouch]

Curious as to what you actually mean? as I do my own accounts thru ltd - wondered if I'm missing something? for the overnight - you can pretty much claim whats 'reasonable' if your staying away from home - if its receipted - I claim all hotels/meals etc receipted plus the allowed overnight allowance for each night & breakfast/lunch if unreceipted - its all on HMRC website & the're v.friendly if you call them? I agree tho - if your paying an umbrella they should be doing all this for you or should have a dispensation.

If you're with an umbrella then 100% of your income is salary. If you're limited subject to IR35 it's only 95%. HMRC give you a 5% allowance to cover the admin involved in running a limited company, so if your other expenses do not exceed that 5% then there's the chance to pay a small dividend/retain profits.

The flat rate VAT scheme allows you to charge 20% VAT to clients but only pay a flat percentage of your gross sales to HMRC, say 14.5% for IT Consultancy (with a 1% discount in the first year of registration). On £1,000 you'd therefore charge the client £1,200 but only pay £174 to HMRC. You keep the difference. There are turnover restrictions, but you can still gain a few thousand each year.

HMRC are useful (sometimes) if you call them, but they won't offer advice about what you're missing out on or be able to give tax planning advice.

[KittyCat]

What do you mean 95% compared to 100% & what is the flat rate tax?

It's more to do with how you work, although it's helpful if the contract backs that up. With IR35 investigations they will look at three main factors:

1. Personal Service - if the contract requires you specifically then it is a contract of service and therefore a pointer toward employment. If you can send a substitute then it is a contract for services which cannot then be seen as employment. This is often deemed the strongest argument against IR35, providing it is a genuine right and not merely an ability to offer a substitute.

2. Control - this covers how, when and where the work is carried out. If you have reasonable autonomy over the work to be done then you would be more likely to be seen as a contractor. If you are told what to do and how to do it, and are expected to work set times for a set fee, it is more indicative of employment.

3. Lack of Mutuality of Obligation (MOO) - this relates to whether you are obliged to carry out the work and whether the client is obliged to offer you work, and also whether you are obliged to carry out work outside the scope of the contract. This applies not only after the current contract finishes, but within the current contract itself. MOO is the most difficult one of the three factors to prove, although the MBF Design case in January 2011 was won by the taxpayer with heavy emphasis on this point.

Then you look for supporting factors, things that would support the notion of you genuinely being in business on your own compared to being a disguised employee (notice period, own tools, website, insurances etc). Get your contract reviewed by a specialist, that way they can put all this into context for you and talk you through how your working conditions compare.

Even if you're inside IR35 a limited company can still work out more tax efficient as you can benefit from flat rate VAT, plus only 95% of your income is salary compared to 100% through a brolly.

Curious as to what you actually mean? as I do my own accounts thru ltd - wondered if I'm missing something? for the overnight - you can pretty much claim whats 'reasonable' if your staying away from home - if its receipted - I claim all hotels/meals etc receipted plus the allowed overnight allowance for each night & breakfast/lunch if unreceipted - its all on HMRC website & the're v.friendly if you call them? I agree tho - if your paying an umbrella they should be doing all this for you or should have a dispensation.