Reply to: HMRC Compliance Check Worries

[norush]

A few points just looking over what has been said:

1. Either you are operating through an umbrella as an employee or a self-employed individual. If you are an employee the umbrella should be operating PAYE, NI etc and you should have a contract of employment, and in addition an expenses policy. The usual procedure would be you submit an expenses claim form weekly/monthly and the expenses are reimbursed to you with your pay.

Alternatively, if you are engaged on a self-employed basis you will be operating under a contract for services you will receive monies without any Tax or NI deductions and you will simply complete a Tax Return at the end of the year and claim back your expenses.

2. It does make a difference if you are engaged by an umbrella or directly with an agency. An employee engaged by an umbrella correctly will be subject to PAYE and NI and will be allowed to claim Travel expenses under employee expenses rules.

Any individual engaged directly by an agency is subject to PAYE and NI, not because they are "employees" but because a piece of legislation (s44 of Income Tax Earnings and Pensions Act and the corresponding National Insurance Contributions legislation "The Agency legislation") says that a company operating as an Agency must deduct PAYE & NI on all payments made to an individual. Under this scenario you are not engaged as an employee, and are not afforded the same Travel expenses rules. (Trying not to confuse, the expenses rules and the Agency legislation as a matter of law do not sit together, the agency legislation effectively creates a ring fenced fixed term contract which means the travel expenses rules cant operate).

3. There is very little information but on the face of it, it seems like there are three possible reasons why HMRC are investigating:
i) it may be that you have been claiming travel expenses twice - ie you have had them via employment income through your umbrella and then reclaiming on your self-assessment tax return
ii) your contract bypasses the umbrella company, so in effect you are directing engaged by the agency and you are not an employee of the umbrella (they are just a payroll company handling payments between you and the umbrella and their contract does not make you an employee of the umbrella)
iii) the umbrella company's compliance/contractual chain is incorrect and HMRC have deemed the Umbrella to be operating as an agency under the Agency legislation.

4. I would recommend you seek out an accountant or tax adviser who specialises in expenses, many offer a free papers review of your case so you need simply send all your paperwork sent from and to HMRC, any contracts relating to the period and details of all payments made to you and expenses claimed.

Many Thanks harmer
I have never been told about sending in any Travel claims forms Monthly.
Pavillion Payroll who I was with at the time deduct my Tax each week. They do not take NI.
NI is paid by me via direct debit.
I fill in a Tx return at the end of each yr. It is on this tax return that I have claimed the mileage.
Thanks again
Dave

[Harmer]

A few points just looking over what has been said:

1. Either you are operating through an umbrella as an employee or a self-employed individual. If you are an employee the umbrella should be operating PAYE, NI etc and you should have a contract of employment, and in addition an expenses policy. The usual procedure would be you submit an expenses claim form weekly/monthly and the expenses are reimbursed to you with your pay.

Alternatively, if you are engaged on a self-employed basis you will be operating under a contract for services you will receive monies without any Tax or NI deductions and you will simply complete a Tax Return at the end of the year and claim back your expenses.

2. It does make a difference if you are engaged by an umbrella or directly with an agency. An employee engaged by an umbrella correctly will be subject to PAYE and NI and will be allowed to claim Travel expenses under employee expenses rules.

Any individual engaged directly by an agency is subject to PAYE and NI, not because they are "employees" but because a piece of legislation (s44 of Income Tax Earnings and Pensions Act and the corresponding National Insurance Contributions legislation "The Agency legislation") says that a company operating as an Agency must deduct PAYE & NI on all payments made to an individual. Under this scenario you are not engaged as an employee, and are not afforded the same Travel expenses rules. (Trying not to confuse, the expenses rules and the Agency legislation as a matter of law do not sit together, the agency legislation effectively creates a ring fenced fixed term contract which means the travel expenses rules cant operate).

3. There is very little information but on the face of it, it seems like there are three possible reasons why HMRC are investigating:
i) it may be that you have been claiming travel expenses twice - ie you have had them via employment income through your umbrella and then reclaiming on your self-assessment tax return
ii) your contract bypasses the umbrella company, so in effect you are directing engaged by the agency and you are not an employee of the umbrella (they are just a payroll company handling payments between you and the umbrella and their contract does not make you an employee of the umbrella)
iii) the umbrella company's compliance/contractual chain is incorrect and HMRC have deemed the Umbrella to be operating as an agency under the Agency legislation.

4. I would recommend you seek out an accountant or tax adviser who specialises in expenses, many offer a free papers review of your case so you need simply send all your paperwork sent from and to HMRC, any contracts relating to the period and details of all payments made to you and expenses claimed.

[norush]

Sorry folks
Looks like I have been nieve by all the slagging I am getting on here.
I am not trying to wind anyone up. Just after some advice!!
I became self employed in 1992. I advertised for work in my field and did the work. I filled in tax returns and paid was was due.
After the good times, and my work started drying up I was offered work in 2009 through an agency that I accepted.
They told me that they would have to pay me through an Umbrella company (Never heard of one before).
The Umbrella company took tax out of my payments.
I then continued to send in my tax return and claim back expenses.
I claimed my mileage for work purposes as I always had.
When I had a letter stating that I was having a compliance check I searches through several internet sites and looked up the 24 Mth rule and the 40% rule.
I was never given a contract of 24 mths, Or expected that I would be in this contract for over 24 Mths. The year that the HMRC are checking was the First yr of this contract (2009-2010)
The paperwork that I had from my Payroll company (That I still have) States that I can claim this mileage.
The HMRC Compliance Officer has told me that after asking for advice that they are to concider my workplace as a permanent workplace.
I have been told that working through an agency that the 24mth rule does not apply.
I have been told that the rules apply in (EIM32130) (EIM32125)
I have been told that the guidance that I refered to does not apply in my case
Any Help appreciated
Dave

[LisaContractorUmbrella]

Many Thanks for the replies.
By Self employed I mean a sole trader.
Cheers

So you are a sole trader working through an umbrella company??? Does that mean that your umbrella company doesn't pay you through PAYE??

[malvolio]

Many Thanks for the replies.
By Self employed I mean a sole trader.
Cheers

So you're a declared Sch D sole trader working through an umbrella company who pay you net of TAX and PAYE

Not surprising you are in for compliance investigation then, is it...

[norush]

Many Thanks for the replies.
By Self employed I mean a sole trader.
Cheers

[centurian]

As this was my first yr through an agency 2009-2010 I am hoping they could not disallow mileage from previous yrs.

Travel claims are effectively a personal claim - it may be processed by the umbrella/agency/end employer etc. But HMRC can most definately look at (and disallow) any of your mileage claims, regardless of the structures

I have to report to 1 Site in the Derby area for collection of the days work details and then travel to where apropriate. Normally within 10 miles radius but sometimes further afield.
I have been told by HMCR that the 24 mth rule does not apply to me because I work through an agency.

Okay, you may find that travel to the main site is not allowed, but travel thereafter should definately be allowed - both under the letter and spirit of the rules. That's the whole definition of a temporary workplace.

Previous to this work (2009-2010) I have not worked through agencies but on a more self employed basis. rarely working at the same site for more than several Days.

Again, this seems quite clear that you are safe in this respect. By self-employed, do you mean Ltd or sole trader.


In short, just because HMRC start jumping up and down, it does not mean that they are correct in everything. But you may need to argue the toss with them quite vigourously until they get the point.

[norush]

Does working through an umbrella or direct with an agency make any difference?
Sorry I really don't know

[adubya]

[norush]

No. I mean to HMRC

[northernladuk]

Dont think I have specifically mentioned that I am through an Umbrella company, Just an agency.
.

Yes you have

i work through an Umbrella company (Sprite)

[norush]

Dont think I have specifically mentioned that I am through an Umbrella company, Just an agency.
They however have my weekly payroll statements that I sent to them to prove my claim for Administration (umbrella company Charges).

They are now asking whether I have claimed Travel expenses over the last 5-6 yrs. If they dissalowed these I would be looking at a bill of around £10.000

As this was my first yr through an agency 2009-2010 I am hoping they could not disallow mileage from previous yrs.
Previously I have worked on a more self employed basis and my work locations have been at various sites. Rarely at the same site for more than several Days.

[LisaContractorUmbrella]

See what you are saying ASB but the umbrella company should have had an overarching employment contract in place - if they didn't that may be why the investigation has arisen

[ASB]

If they are trying to disallow the travel expenses then they are, in effect, stating that it is a permanent workplace. This is not related to how long one has been there.

They may be trying to push a view that since the umbrella is not attended then each assignment is to a permanent workplace (albeit of a limited duration). I guess the employment contract between the OP and the umbrella may be relevant here.

The comparison I'd use would be I get a job with A PLC in one location for 6 months, then get a job with B PLC for 6 months. Any travel would be ordinary commuting.

I'm not saying that HMRC are right, but I can see what they might be arguing.

[LisaContractorUmbrella]

Norush - do you have something in writing from HMR&C stating that the 24 month rule will not apply because whether you work through an agency or not will make no difference to either that or the 40% rule. Also, if HMR&C have said the 24 month rule does not apply why are your expenses being disallowed? What has your umbrella company had to say about all this?