What Can A Contractor Claim As Expenses Under an Umbrella Company?
If you don't have time to read HMRC's documents on expenses and taxes this post can help you understand which expenses contractors can claim working under an Umbrella company.
What Is a Company Expense?
A business expense is a cost where the:
expenditure is incurred wholly and exclusively for the purpose of the trade, profession or vocation
Which Expenses Can You Claim Under An Umbrella Company?
One of the benefits of working as a contractor under an umbrella company is that you can claim for certain legitimate business costs and expenses - as long as they are incurred during an assignment. The types of expenses you can claim are dependent on the job and whether it is subject to supervision, direction or control (SDC).
Below is a summary of the most common expenses you can claim, however for a more detailed look please refer to our Expenses Handbook or get in touch.
Claiming Travel Expenses
You are able to claim the cost of travel to and from your temporary place of work. Rates are:
- 45p for the first 10,000 miles in any fiscal year and 25p per mile thereafter (this covers the running cost of your vehicle and fuel).
- If you travel as a passenger you can claim 5p per mile.
- Motorcycle/Bicycle rates are 24p and 20p per mile respectively.
You are also able to claim for the cost of parking and congestion charges but not any speeding or parking fines.
Travel by public transport can also be claimed for but you must have a valid receipt.
Claiming Food, Drink & Accommodation Expenses
You are able to claim for the cost of a hotel/B&B as can the reasonable cost of additional meals taken during an overnight stay. There isn't a set cost however meals and accommodation must be deemed 'reasonable.'
Pensions are a hot topic for contractors as they are one of the few remaining tax breaks they can claim. You can invest part of your income into a pensions scheme and save not only the income tax but also your employers and employees NI contributions are lower than they would have been. You can read more about pensions here.
Claiming for Equipment Expenses
You can claim for equipment that is specifically required for your current contract where the equipment is wholly necessary to complete your job. Any additional pieces of equipment, those deemed 'nice to have' cannot be claimed.
Claiming Clothing Expenses
If you need to wear protective equipment you can claim this as a business expense. You can also claim for clothing that is required for the performance of your contract and that could not be worn outside of work. Any items of clothing that are 'every day' e.g. could be worn outside of your job cannot be claimed. You cannot claim for alternations or dry-cleaning.
Claiming for Training Expenses
You are able to claim for training courses which are wholly and totally relevant to the performance of your duties under your existing contract. It is not enough to simply be relevant to the job or its duties.
Which Expenses Can You Claim as a Contractor Working Through a Limited Company?
If you are a contractor working through your own Limited company (and you are outside of IR35) then business expenses are relatively straightforward. You can claim for expenses which are wholly and exclusively for the purposes of your business such as: company formation fees, accountancy fees, business travel and accommodation costs, stationery and postage costs, telephone calls, National Insurance contributions, insurance, contributions to an executive pension plan and business entertainment. If you are interested in making the switch to a Limited company eQuidity can have you set up in just three hours.
If you would like any further advice about claiming business expenses or the process involved in switching to a Limited Company please call our UK-based help team on 0117 985 6999 or email us your question: enquiries@eQuidity.co.uk
It is important to note that claiming expenses you did not occur can be viewed as Tax Avoidance. The HMRC also reserve the right to review up to six years into your tax payments. If you are claiming business expenses it is important you retain your receipts either in paper or digitally.
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