Expenses for Umbrella contractors

Tuesday 29th July, 2014
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Contractor Info

Expenses can be a minefield, especially when you are new to contracting, so here is a brief guide on the rules.

In order to qualify for tax relief on expenses, you must satisfy the following criteria:-

  1. You must intend to work on more than one site during your employment with us
  2. You do not expect to work on the same site for more than 24 months

This is an example of criteria 1

You join PayStream with the intention of taking a temporary assignment which will turn permanent in the future. You are not allowed to claim expenses for the duration of your temporary assignment, as it is your intention to take a permanent role and not continue with further temporary assignments on a different site.

This is an example of criteria 2

You join PayStream with a 12 month contract and you intend to take further temporary assignments at different sites, after 12 months your client offers you a further 18 months contract extension on the same site. At this point it is your intention to be on the same site for a total of 30 months from your original start date and you therefore must no longer claim expenses from the start of your extension contract due to the 24 month rule.

Once you know that you qualify to claim expenses the key thing to remember is that for a claim to be allowable the expense must be incurred:-

  • Wholly
  • Necessarily
  • Exclusively

In the performance of your employment with us to satisfy HMRC for tax relief purposes.

Here are some examples of when expenses can and can't be claimed

  • Example 1:
    You need a new suit for work. This doesn’t satisfy the condition of ‘exclusively’ as you could wear the suit out of work if you wanted. Whereas safety boots and work wear would be allowable.
  • Example 2:
    You become a member of a professional body associated with your job, such as National Union of Teachers or British Association of Social Workers. Providing the professional body is HMRC approved, you can claim for the annual subscription costs.
  • Example 3:
    On the way to work you get a puncture and need a new tyre. This again doesn't satisfy the condition of 'exclusive' as you are likely to drive your vehicle for personal journeys and the mileage reimbursement of 45p per mile covers wear and tear on your vehicle.
  • Example 4:
    On the way to work you decide to buy your colleagues a birthday cake. While it is a lovely thought, it doesn't satisfy the condition of 'necessary' as you don't need to buy this cake to do your job.
  • Example 5:
    You use your mobile phone to make both business and private calls. Although some of your mobile contract minutes have been used up on making calls for your job, the monthly contract cost is not 'wholly' attributable to business and therefore would not be allowable.
  • Example 6:
    Your worksite is too far from your permanent residence for it to be feasible for you to commute. If it is 'necessary' for you to stay away from home due to work and as long as you continue to maintain costs for your permanent residence, you can claim tax relief on expenses
  • Example 7:
    The cost of calls made over your contract allowance are allowable however, these must be supported by an itemized bill.

We hope this guide gives you a general overview of the policy but it is in no way exhaustive. Our full expenses policy is available on your portal in the downloads section but please see here for an easy to read guide.



Once you know that you qualify to claim expenses the key thing to remember is that for a claim to be allowable the expense must be incurred wholly, necessarily and exclusively.