Inside IR35 and Expenses - Can you still claim?

[lucyclarityumbrella]

Isn't that the law rather than a company policy and should apply across the board?

Same thing with CU

[northernladuk]

Cheers Lucy - thanks for that.

Just wish I could use you're company as umbrella. IT seems to be a bit "random" with others...

It would make coming on here and moaning about it a bit of a problem though wouldn't it?

[psychocandy]

OK as far as we are concerned, NO non-chargeable expenses are allowable at source via an umbrella company (these are the ones that may have been previously allowable for tax relief purposes), if the contractor is not under SDC then they "may" be able to claim them via self-assessment at the end of the financial year. Basically, in the ITEPA, there is a section which prohibits companies from processing these via salary sacrifice.

As for chargeable expenses (these can be processed via the umbrella and are the ones that the client is agreeing to reimburse you for), you have to look at a few things; imagine you are a permanent employee of the business and you are sent out to a meeting and drive, then you would be reimbursed the expenses for travelling to that meeting and as such, they are reimbursed in full to you. If the client is agreeing to reimburse home to work travel (something that a permanent employee wouldn't get), then this will be taxed as it is seen as a benefit.

So in a nutshell - expenses for tax relief purposes = speak with HMRC and ask them to declare if you are under SDC; if they say you are not then these need to be claimed via SA.

As for an inside IR35 contractor, our HMRC contact has stated that it is highly unlikely that they will pass the SDC test, hence our suggestion to get confirmation direct from HMRC, especially if the expenses are an important part of the decision on whether to take the contract or not!

HTH

Cheers Lucy - thanks for that.

Just wish I could use you're company as umbrella. IT seems to be a bit "random" with others...

[TheFaQQer]

Isn't that the law rather than a company policy and should apply across the board?

Yes

[northernladuk]

Isn't that the law rather than a company policy and should apply across the board?

[lucyclarityumbrella]

OK as far as we are concerned, NO non-chargeable expenses are allowable at source via an umbrella company (these are the ones that may have been previously allowable for tax relief purposes), if the contractor is not under SDC then they "may" be able to claim them via self-assessment at the end of the financial year. Basically, in the ITEPA, there is a section which prohibits companies from processing these via salary sacrifice.

As for chargeable expenses (these can be processed via the umbrella and are the ones that the client is agreeing to reimburse you for), you have to look at a few things; imagine you are a permanent employee of the business and you are sent out to a meeting and drive, then you would be reimbursed the expenses for travelling to that meeting and as such, they are reimbursed in full to you. If the client is agreeing to reimburse home to work travel (something that a permanent employee wouldn't get), then this will be taxed as it is seen as a benefit.

So in a nutshell - expenses for tax relief purposes = speak with HMRC and ask them to declare if you are under SDC; if they say you are not then these need to be claimed via SA.

As for an inside IR35 contractor, our HMRC contact has stated that it is highly unlikely that they will pass the SDC test, hence our suggestion to get confirmation direct from HMRC, especially if the expenses are an important part of the decision on whether to take the contract or not!

HTH

[psychocandy]

If they are non-chargeable (ie the client is not agreeing to reimburse them) then you are gaining a personal tax benefit on them (if they are processing via salary sacrifice) so HMRC would be on your back too to reclaim it!

Lucy - out of interest what is your companies policy for expenses for inside IR35 PS contractors?

[lucyclarityumbrella]

In this brave new world, though, if they let me claim expenses and get it wrong, its they're neck on the block, isn't it? Surprised they'd allow this if theres any doubt?

If they are non-chargeable (ie the client is not agreeing to reimburse them) then you are gaining a personal tax benefit on them (if they are processing via salary sacrifice) so HMRC would be on your back too to reclaim it!

[TheFaQQer]

But as my "employer" thats the umbrellas look out isnt it?

No. They may get told off (possibly fined) for not operating payroll correctly, but it's your responsibility to ensure that you aren't claiming for something that you aren't allowed to, you are the one committing the fraud, you are the one who is liable.

If you were operating outside IR35 via a limited company, the same holds true - the employee claims £1k for something they aren't allowed as a valid expense. Employer gets told off for allowing it, employee has to pay the tax due on the undeclared income.

(Not sure why "employer" is in quotes - the umbrella definitely IS your employer)

[psychocandy]

That is correct - you don't get your 5% any more if you are inside IR35 in the public sector, because you no longer have any uncertainty so you don't need to worry about it (I paraphrase the guidance from HMT / HMRC at the time).

If you claim expenses that aren't allowed,then you would owe the additional tax and NI on your falsely declared income (plus interest and penalties that may be applied).

But as my "employer" thats the umbrellas look out isnt it?

[TheFaQQer]

I thought if client declared you inside IR35 in PS that was it no expenses.

That is correct - you don't get your 5% any more if you are inside IR35 in the public sector, because you no longer have any uncertainty so you don't need to worry about it (I paraphrase the guidance from HMT / HMRC at the time).

If you claim expenses that aren't allowed, then you would owe the additional tax and NI on your falsely declared income (plus interest and penalties that may be applied).

[cojak]

Umbrella Companies Expenses Policy

[northernladuk]

Did you clarify which expenses exactly they are talking about?

[psychocandy]

Bit confused now - I thought if client declared you inside IR35 in PS that was it no expenses.

I know before April 2017 changes it all came down to SDC. I appreciate it if a PS client declares you inside it may be difficult to deny SDC but is it still "possible"?
Got an umbrella telling me I can claim expenses.

In this brave new world, though, if they let me claim expenses and get it wrong, its they're neck on the block, isn't it? Surprised they'd allow this if theres any doubt?

Anyone else claimed?