Reply to: Subsistence allowance

[Old Greg]

I think you'll find a vast majority of IT contractors claim legitimate expenses as ultimately the buck stops with the claimant not the advisor.

Why do people come into contracting thinking it's a big fiddle? It must be the small pond permy mentality that can't grasp a different way of working.

Contracting is a big fiddle. The small pond permy mentality holds that it is an endless series of very small fiddles.

[The Spartan]

It still amazes me that some people don't get this, they go out every day to buy lunch and posh coffee as if it's free.

Maybe it's a transitional thing, say as a permie you do this on a daily basis it's money that you spend out of your wages. Whereas at least as contractor it gets expensed back to you so at least you receive some benefit in part.

[gingerjedi]

it's £5 a day you won't pay tax on. You only actually get back around £1.50

It still amazes me that some people don't get this, they go out every day to buy lunch and posh coffee as if it's free.

[TheDragon]

True, but HMRC take the pragmatic view that you're going to spend something on things like papers and a beer when away from home that you wouldn't normally spend. Like FRS, it's saves more on paperwork than it costs.

And it's not £5 a day, it's £5 a day you won't pay tax on. You only actually get back around £1.50

As I said Mal, it's all sorted out now. I've provided a journal of expenses.The brolly mislead me, but all resolved now and will keep all receipts from now on.

[malvolio]

I thought you could only claim this if you spent it?

True, but HMRC take the pragmatic view that you're going to spend something on things like papers and a beer when away from home that you wouldn't normally spend. Like FRS, it's saves more on paperwork than it costs.

And it's not £5 a day, it's £5 a day you won't pay tax on. You only actually get back around £1.50

[The Spartan]

As Malvolia says, I've been claiming £5 Personal Incidental Expenses (or PIE) since I started contracting. Had one investigation into expenses in all that time and they were fine with it.

So you can legitimately claim £5 tax free for every night you're working away from home in the UK, or £10 outside the UK, with no need to keep receipts.

I thought you could only claim this if you spent it?

[The Spartan]

Shocking!!!

You can't claim set amounts ever, unless you've actually spent that amount. Always keep your receipts regardless of what you're told.

[PAH]

As Malvolia says, I've been claiming £5 Personal Incidental Expenses (or PIE) since I started contracting. Had one investigation into expenses in all that time and they were fine with it.

So you can legitimately claim £5 tax free for every night you're working away from home in the UK, or £10 outside the UK, with no need to keep receipts.

Here's the HMRC info:

Class 1 NICs : Expenses and allowances : Incidental overnight expenses (previously Personal incidental expenses or PIEs) : Position from 6 April 1995

Class 1 NICs : Expenses and allowances : Incidental overnight expenses (previously personal incidental expenses or PIEs) : Position from 6 April 2001

Above £5 and you are liable for tax on the full amount, unless your brolly really does have 'an understanding' with HMRC and isn't just giving you some of your profit out of their cut in a different way to make it look like you get a better deal with them than other brollies.

As expenses are only declared to HMRC annually (on your P60 IIRC) you may be able to talk the brolly into reworking the expenses incurred so far so they fit the rules if you want to play it safe.

[TheDragon]

You need a new brolly then. Do you suppose HMRC won't spot you've mysteriously spent exactly the same amount every working day?

Expect all expenses claimed to date to be disallowed, your tax to be recalcualted on the basis that all your earnings are salary and for interest to be added. You may get away without a fine if you were acting in good faith - which implies not fidding the records.

Incidentally, "subsistence" is £5 a day working in the UK away from home, £10 a day abroad. Everything else is repayment of personal expenses incurred. If you make a profit, you're doing it wrong.

And next time, learn the f***ing rules for yourself.

Cheers Mal. Good advice.

[malvolio]

Yeah, as if these exist...

I've just spoken to the brolly as they recommend a 'journal' of daily expenses will do.

Thanks

You need a new brolly then. Do you suppose HMRC won't spot you've mysteriously spent exactly the same amount every working day?

Expect all expenses claimed to date to be disallowed, your tax to be recalcualted on the basis that all your earnings are salary and for interest to be added. You may get away without a fine if you were acting in good faith - which implies not fidding the records.

Incidentally, "subsistence" is £5 a day working in the UK away from home, £10 a day abroad. Everything else is repayment of personal expenses incurred. If you make a profit, you're doing it wrong.

And next time, learn the f***ing rules for yourself.

[TheBigD]

I've only been contacting for a year or so and going through an umbrella. I've been submitting a daily allowance for subsistence @ £9.89 per day without receipts as advised. The problem is my payroll number has been singled out for inspection by the tax man. I have no receipts. Has anyone else had this?

I used a brolly when I first started, which also claimed they didn't need to see receipts, but that I should keep them anyway (although this last bit was in very small writing at the back of their welcome pack).

If your'e going to make a go of contracting, you'll need to start finding things out for yourself.

[Arturo Bassick]

Yeah, as if these exist...

I've just spoken to the brolly as they recommend a 'journal' of daily expenses will do.

Thanks

There is also a "beginners guide" and other interesting stuff over there --->
on the right. It has a specific section for brollies and there is even a specific section on dispensations.

[TheDragon]

the "sensible" forums

Yeah, as if these exist...

I've just spoken to the brolly as they recommend a 'journal' of daily expenses will do.

Thanks

[Arturo Bassick]

Being a novice to contracting, I expect my umbrella to give me professional advise. If they give me duff info it's their problem.

I expect you will find that they have not given you duff information, just that you have chosen to interpret it in a certain way.
It has been discussed many times on the "sensible" forums of this site.

Brolly says: We will pay up to 25 pounds per day expenses without receipts.
You understand that as: I can claim 25 pounds per day tax free without receipts.

If you want to know how much you can claim as expenses tax free without receipts the people you should be asking are HMRC. They have a web site you know. It has all sorts of information and advice.

[gingerjedi]

When I first started many years ago I was using a brolly, they told me I didn't need to submit receipts but I must keep them should they be required.

Has that changed?