Umbrella company - expenses policy
Claiming back expenses under an umbrella company
Below are details of allowable expenses that can be claimed through our Umbrella Company. A Dispensation has been granted by the Inland Revenue for these expenses. We will allow employees to account for all necessary and reasonable expenses as set out below.
Please follow these allowable expenses carefully, and wherever possible obtain a receipt for the expense. If these guidelines are not followed individuals may be separately assessed and found liable for tax on any taxable benefits. However, we will be checking all expense claims to ensure that only allowable expenses are reimbursed. In general, for an expense to be allowable it must be incurred wholly, necessarily and exclusively in the performance of your duties. If you are in any doubt as to whether an expense will be allowable or not, please contact our office.
Travel and Subsistence - 24 Month Rule
Before travel, subsistence and mileage expenses will be allowable as a deduction against tax, the place of work must qualify as a temporary workplace. If you only work on a single assignment, without the anticipation that there will be further assignments, your workplace will be regarded as permanent for these expense types and they will not be allowable against tax.
If you are travelling from home to your contract then this is subject to the ‘24 month rule’. This states that travel from home to work is only allowable as a tax-deductible expense for as long as you believe your contract will not exceed 24 months. For example, you have a contract for seven months that is renewed again and again. If you have your contract renewed for a third time then you would come under the 24 month rule and AT THAT POINT (21 months with your client) the travel expenses from home to work cease to become tax deductible. For any new contracts there will need to be a sufficient difference in travel distance from your first contract e.g opposite direction, or at least 10 mile difference. Without a significant change in journey the mileage expense will not be allowed. Where you fall outside the ’24 month rule’, then travel between your home, or any other place that is not a workplace, is not allowable.
Unreceipted Expenses
Subsistence
Where you are unable to obtain a receipt and you are working at a temporary workplace but are not staying overnight, then a meal allowance can be claimed on the following basis:
- Up to £6.50 per day for breakfast if you leave home for work before 6.30am.
- Up to £6.50 if you work more than 5 hours a day but less than 10 hours a day (excluding breaks and travel time).
- Up to £14 if your work and travel time comes to more than 10 hours a day (excluding breaks).
Accommodation
Where you are unable to obtain a receipt, an allowance will be paid in respect of accommodation, meals and incidental subsistence costs, at the following rates:
- Up to £45 per night when staying within the UK and Eire but outside the M25
- Up to £55 per night when staying within the M25
- Up to £65 per night when staying outside the UK and Eire.
*We do recommend that you keep all receipts for evidence just incase you are asked to provide proof to HMRC that you incurred the expense
Mileage
Mileage can be claimed for business related travel including to and from your home to your place of work, the car must be insured for Business use and will be subject to the 24 month rule above. The following rates are applicable.
Vehicle Type |
Rate pence per mile |
|
First 10,000 business miles |
Over 10,000 business miles |
|
Car |
40p |
25p |
Motorbike |
24p |
24p |
Cycle |
20p |
20p |
(A spreadsheet is available to help with claiming this expense and recording your start place and end place for each journey – please contact this office if you require this.)
Receipted Expenses
Subsistence
Where you are staying away from home then you can claim for the cost
of a receipted evening meal (c. £15 - £26).
Meals can also be claimed where your work takes you away from home
over a ‘normal’ meal time. For example, you have to work or
travel until 9pm, you could then claim the cost of an evening meal.
Accommodation
Where you need to work away from home because of your contract then you can claim for the cost of the accommodation and breakfast, supported by receipts subject to the following limits
- £110 per night staying within the M25
- £90 per night outside the M25
- £120 per night outside the UK and Eire
Where you have receipted expenditure on accommodation, an un- receipted allowance may be paid in respect of meals and other incidental expenses, when you are staying away from home of
- Up to £20 per night when staying within the UK and Eire or
- Up to £30 per night when staying outside the UK and Eire.
Incidentals
The maximum cost of incidental expenses of £5 per day in the UK and £10 per day if overseas can be claimed, for each evening that you have to stay away from home. This is to cover costs such as laundry, personal telephone calls and newspapers. Receipts for these do not have to be provided, but this is not a round sum allowance. Expenses in this category should be separately identified as incidental expenses.
Rented Accommodation
Where the accommodation is rented, then the cost (including gas, electricity, council tax, but excluding water rates) can be reclaimed provided that you maintain and continue payment for a main residence elsewhere in the UK, to which you return each weekend. A copy of the rental agreement and receipts for the payment of the rent must accompany the claim. Where you do not return to your main residence at weekends, then you can only claim 5/7 of the cost of the rental accommodation each week.
Friends or Family
Where you are staying with friends or family, you can claim £25 per night (no other allowances to be claimed) as a friends and family allowance. You will need to provide us with name, address and tel. number of the place where you are staying and the relevant date.
Rail, Bus, Parking and Air travel
Rail, Bus and air travel to your place of work can be claimed, but
receipts are required.
Parking costs can also be claimed at the most economic rate. Again
receipts are required.
Telephone
Only the cost of business calls on your private telecommunication system may be claimed. This includes mobiles and Internet access. Where a separate telecommunication system is used exclusively for business purposes, then the full cost of this may be claimed (including rental/standing charges).
Subscriptions
Those that are necessary for you to gain and maintain your professional
standing are allowable. e.g. to professional bodies. For a list of allowable
professional subscriptions, please visit www.hmrc.gov.uk/list3/list3.pdf
Stationery and books
Where these are used wholly, necessarily and exclusively in the performance of your duties then they are allowable. Receipts must be provided.
Eyesight Test
Where an eyesight test is necessary for the initial or continued use of visual display equipment on your assignment, then a claim of up to £15 towards the costs of the eyesight test can be made. A receipt must be provided from a qualified optician.
Computer Hardware and Software
Computer Hardware and software are allowable where it can be proved that it is essential to your job. A maximum of £500 p.a. can be claimed. We will require a receipt for the full amount of the costs, even if the receipt is for over £500.
Training
Only certain types of training are tax deductible. For training to qualify as tax deductible it has to be undertaken as necessary for you to complete in order to continue your work for the company. If the training is undertaken to progress your career or improve your skills then this would not qualify as it is considered to be a personal benefit (under a contract that is within IR35, this can not be claimed).
Click here to download an Expense
Record Form
How much you can save
Starter Pack
Umbrella Service
Impartial Advice
For further details, please contact Danbro for Umbrella Services: 01253 600141, General Enquiries: 01253 600140, London Office: 020 7836 8400 or email enquiries@danbro.co.uk or send an enquiry.
