Claiming Expenses with Umbrella Company

Can I claim Expenses through my umbrella company?

One of the most frequently asked questions that we receive is in relation to reclaiming expenses as a contractor working through our umbrella services  – here’s what you need to know.

Contractors who have been around for some time would have noticed significant changes in this arena over the years. We remember receiving receipts and train tickets scanned and faxed to us on a daily basis. At that time, certain expenses could be used to offset against tax liability. However, from April 2017 a new legislation called the Finance Bill 2016 (under S339A ITEPA 2003) came into force for workers working through an employment intermediary or umbrella company.

Restrictions were placed against tax relief for home to work travel and subsistence expenses for workers engaged through an employment intermediary.

The travel and subsistence expense rules apply in the same way as they would if the worker was engaged directly as an employee of the end client. In simple terms, just as a permanent employee can’t claim, it is no longer possible to claim expenses for business travel including accommodation or food and drink purchased as part of the working day.

These restrictions apply to all those who fall under Supervision Direction and Control (SDC):

• Supervision: this implies that there is someone overseeing, assisting or aiding the work being done to ensure that it is being done correctly.
• Direction: this involves someone providing instructions guidance and advice as to how work is to be carried out.
• Control: this is having someone dictate what work is to be done, how, when and at times, where.

If a person falls under even just one of the above categories, then SDC is deemed to apply. As a general rule, HMRC considers that agency workers who provide services in industries where the work is governed by regulations or frameworks, they will be subject to SDC, examples of this are teachers, doctors, nurses and social workers. Regulatory bodies such as the General Medical Council and Nursing Midwifery Council set a standard for all to adhere to.

Our default position at Healthchart is that all contractors fall under supervision, direction and control therefore we do not allow tax relief for any travel and subsistence expenses to offset against the tax we deduct in-line with our PAYE obligations.

If you feel that SDC does not apply to you, please refer to HMRC guidelines and contact us.

What if you have lots of other work-related expenses? You can discuss this with your agency or end client as they may be willing to reimburse at least part of your expenditure. There is usually an uplift in the pay rate when being paid through an umbrella, so they may argue that this rate is to cover any added expenses. However, if you don’t ask, you will never know.

If you do incur other legitimate expenses other than travel & subsistence, it would be worth keeping a record of these and submitting a self-assessment at the end of the tax year (we have affiliated companies that can help with this – just ask).

If you have any questions about claiming expenses through an umbrella company, or about SDC parameters please be in touch, we would be happy to provide a free consultation that will answer all of your questions.