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Allowable Business Expenses
One of the great benefits of using an Umbrella Company is that you can claim the cost of certain business expenses incurred further to temporary site based work on a tax free basis. This can mean that you retain a lot more of your income than you otherwise would, especially if you are required to stay overnight at a client site a few days a week and pay for a Hotel/B&B out of your own pocket.Of course it is much better for you if you do not incur these business expenses at all as you are only saving the tax otherwise payable, but this is not always possible when undertaking contract assignments. Where you have income in the higher rate tax band you save 41% tax on expenses, as otherwise you would pay Income Tax at 40% and Employees National Insurance at 1% (even before considering the 12.8% class 1 Employer’s NI). If you are required to incur many business expenses in order to undertake a certain contract you will benefit substantially.
Wholly, exclusively and necessarily incurred business expenses
The important thing to remember when claiming business expenses is that the expense must have been incurred wholly, exclusively and necessarily in the performance of your duties. It is not possible under any circumstances to claim a personal expense.Receipts for business expenses must be kept in order to prove that the expense was actually incurred. Where the HM Revenue and Customs were to undertake a PAYE Investigation and decided to question your business expenses you would need to provide receipts to prove the claim. If you were unable to provide receipts you could wind up paying backdated income tax and national insurance on the value of the expense.
Claimable Site Based Business Expenses
The level of expenses you can claim depends upon the Umbrella Companies expense policy and the level of actual expenses you incur. Expenses normally claimable when using an Umbrella Company solution include:- Site Based Travel (Includes train, tram, tube, taxi, bus, flights, mileage etc)
- Site Based Subsistence
- Hotel & Bed and Breakfast (for an overnight stay only)
- Computer Supplies (including software costs)
- Business Telecoms
- Trade Journal Subscriptions
- Postage and Stationary
All receipts should be VAT receipts where appropriate. Expense claims should be properly completed using an Expense Claim form.
