In this article, we concentrate on the changes made to travel- and subsistence-related costs introduced from April 2016. Umbrella Supermarket reports on:
We’ve written before on the subject on umbrella contractor expenses, but the general range of expenses which contractors used to be able to claim back through an umbrella company were:
Business equipment you need for a particular contract (especially if stipulated in the T&Cs of your contract with a client)
While most of the above remain claimable, the expenses with a star next to them have changed because of a significant amendment to the governing rules by HMRC. These expenses can now can no longer be claimed if your placement is affected by the Supervision, Direction, and Control Rules (April 2016).
In the Autumn statement of 2014 (also reported on BBC News), the then coalition Government expressed the belief that employment intermediaries were using contracts that allowed contractors to claim the cost of travel between their home and their place of work as an expense – a right which standard employees did not enjoy.
They stated that such concessions should only be allowed for those people who were genuinely self-employed and for whom there was a genuine financial risk in working on client contract work. This expression of belief was then followed up by an announcement in the March 2015 budget which came into law from April 2016.
The revised law stated that umbrella contractors and limited company contractors working within the scope of IR35 could no longer claim subsistence or travel expenses who were under the direction, supervision, and direct control of their end client (in essence, had they used the much-discredited CEST tool on the HMRC website, the result would have been that their engagement was within IR35).
The Supervision, Direction, and Control Rules (April 2016) now, in practicality, govern whether umbrella contractors and limited company contractors working within the scope of IR35 are able to make legitimate claims on travel and subsistence related expenses.
In essence under the new rules contractors can continue to claim travel and subsistence related expenses only if they are travelling to a “temporary workplace” as part of their duties (e.g. a nurse driving to a patient’s home). This mean that claiming for travel to and from a fixed client location (e.g. a nurse driving to the same hospital every day) is no longer allowed.
For a temporary work place you may claim 45p per mile for the first 10,000 miles and 25p per mile thereafter. If you are a passenger in someone else’s car travelling to a “temporary workplace”, you may claim up to 5p per mile. Public transport costs can also be claimed however you must keep the receipt for each individual part of the journey.
The taxman has set a very high standard for umbrella contractors who claim that they’re not covered by the supervision, direction, and control rules. Indeed, as reported by ContractorUK, HMRC will automatically consider you and your contract covered by them if you work as an umbrella contractor.
But what if you can persuade them otherwise? If you’re going to prove HMRC wrong then you’ll need to consider the following.
Traditionally HMRC classed a temporary address as somewhere that you expect to be working for less than 24 months. Anything over this time period and the location will be classified as your permanent work address.
A contractor will often take a contract for a certain amount of time and then their contract will be extended. This is good news for you - you don’t have to find a new contract. However, if the extension takes your work for the client beyond the 24-month mark, you will no longer be allowed to claim for travel expenses.
Also, if you have a 20-month contract and it gets extended by a further 12 months, you will no longer be able to claim travel expenses because you now know that your period of time with your contract customer will extend past the two year deadline.
If the 24 month rule seemed simple, then HMRC has latterly managed to muddy the waters by focusing on a contractor’s normal commute over and above the 24 month rule.
The location of your contracts will also stop you from claiming on travel expenses. If HMRC think that the journey, or the temporary working locations you’re travelling to are too similar or even “normal” for an employee to make (e.g. commuting), they will not allow you to claim for travel expenses.
For example if you had one customer on an industrial estate for a couple of months then found another customer a couple of streets away, this will cause a problem when claiming travel expenses because, to HMRC, that “area” is your normal place of work.
This rule even applies if you have a gap in between your contracts. For your temporary workplace to count as a separate place of work, there must be a contract in between these two similar places of work, at an entirely different location.
Yet HMRC aren’t finished there. For the gap between locations to be considered long enough, HMRC use a 40% rule. This means that if you have spent more than 40% of the last 24-months at a temporary workplace/area, even if it is on a different contract, then you will not be allowed to claim for travel expenses.
There are hundreds of umbrella companies in the UK right now competing for your business but how do you sift through all of the offers to find the best one for you? The answer is compare umbrella companies online with the UK leading umbrella comparison site umbrellasupermarket.co.uk
To start your search, please click here.
Any contractor considering switching to an umbrella company will want to know how to find the best provider to work with.
Although you could spend your precious time and energy searching the web for the best umbrella company, there is an easier way – using an umbrella calculator.
In this guide, Umbrella Supermarket explains why every contractor should use an umbrella calculator in 2021.
If you are considering contracting you will need to decide on PAYE or umbrella.
It can be a difficult decision to make and contractors will inevitably be questioning which option will be the best for them.
To help every contractor get on the right track for them, in this guide Umbrella Supermarket looks at PAYE vs umbrella, outlining the key differences and how this will impact you.
There are many reasons that contractors across the UK opt to work under an umbrella company.
Umbrella companies offer an easy way to contract and remove the need for the contractors to worry about the burdens of admin, finances, tax and IR35, all things that limited company contractors have to deal with.
For this reason, many contractors will be weighing up their options and questioning whether it is worth using an umbrella company in 2021. To help make the decision that little bit easier, Umbrella Supermarket has put together this guide on the pros and cons of using an umbrella company.
Any contractor that is considering operating through an umbrella company in 2021 will need to understand Umbrella Company fees - from why an umbrella company charges fees, how they are paid to how much the contractor will pay.
In this guide, Umbrella Supermarket answers those all-important questions to help every contractor know exactly where they stand when it comes to umbrella company fees.
If you’ve made the decision to contract through an umbrella company in 2021, you will next need to find an umbrella company that’s right for you.
After all, there are lots of umbrella companies out there, so how do you know which one to choose?
To help you find the best umbrella company for you, in this guide Umbrella Supermarket outlines what makes a good umbrella company, so you can rest assured you’re making the right move.
One of the many advantages to operating through an umbrella company for contractors is that they become an employee of their chosen provider.
In turn, this means that the contractor will be automatically enrolled onto the umbrella company’s workplace pension scheme.
To help contractors find out more about umbrella company pensions Umbrella Supermarket has put together this handy guide.
If you are considering contracting through an umbrella company you will naturally have questions and queries over how they work.
After all, making the move to umbrella can be a big step for contractors. To help, in this guide Umbrella Supermarket explains how to get started with an umbrella company and share our top tips for using one in 2021.
PAYE or umbrella is a question asked by every contractor. Which one you opt for will have a big impact on your contracting career and lifestyle. So, it's important to make the right decision for you.
To help makes things a little bit easier, Umbrella Supermarket has put together this guide on PAYE or umbrella, outlining the key differences between each, to help you make the best and most informed decision for you.
One of the many benefits to working through an umbrella company is that you will receive holiday pay as well as a range of other statutory benefits including sick pay, maternity and paternity pay.
To find out more about umbrella company holiday pay, and how to calculate how much you will be entitled to, Umbrella Supermarket has put together this handy guide.
Contractors must make several decisions throughout their contracting careers. One big decision contractors have to make is how they will operate.
One way that contractors can work is through an umbrella company.
Umbrella companies have become an increasingly popular way to contract in the past few years, offering many benefits to the contractor. But, how do you know whether this option is right for you?
To help every contractor make the right decision for them, in this guide, Umbrella Supermarket explains when not to use an umbrella company.
There are tons of benefits to using an umbrella company, which is why they have become such a popular option for contractors in recent years.
After all, an umbrella company takes away the stress and hassle of operating through a limited company whilst offering contractors a range of advantages, such as statutory rights, paying them a salary, deducting correct tax levels and National Insurance, and taking care of tasks like expense processing and invoicing.
However, as more and more contractors opt to use the services of an umbrella company, more providers have started to claim that they are HMRC approved.
To bust the myths around HMRC approved umbrella companies and get straight to the facts, in today's guide Umbrella Supermarket look at whether HMRC approved umbrella companies really exist, so you know exactly where you stand.
If you're considering making the leap to contracting, you will understandably want to know how much you will have to pay in umbrella company costs. After all, this amount comes directly out of the contractor’s pocket, so it’s important to be clued up on how much you should expect to pay.
To help contractors, in this guide Umbrella Supermarket answer the all-important question of how umbrella companies cost in 2021.
