As a contractor, it is fundamentally key that you legitimately claim expenses correctly as this can often be a minefield and it has always been.
At SRM Payroll, we know it’s perfectly fine to claim for professional subscriptions and protective clothing, if they are used 100% (wholly & exclusively), for work related purposes and nothing else. In addition, SRM Payroll, through its expertise, we can help you identify all the other expenses you’re entitled to claim as a contractor.
SRM Payroll encourages our contractor employees to be compliant with HMRC and should not exploit grey areas in the tax system as these could potentially lead to HMRC investigations.
We value objectivity and we promote our contractors to join us on the basis of true and accurate facts we provide them so that they can make informed decisions. Your decision to join an Umbrella should be based solely on the relevant facts and the service we provide, which is what our New Business Team are dedicated to providing you with. Remember, we are here to help and we can advise you on which business expenses you can legitimately claim.
If you are subject to Supervision, Direction and Control (inside IR35) you are longer be able to claim Travel and Subsistence expenses from 6 April 2017 and therefore SRM Payroll will NOT accept or process such expenses. The section below applies to those who are NOT subject to SDC.
Types of Business Expenses
There are two main types of business expenses that contractors like you can legitimately claim. The first and most common are Pure Business Expenses, and the other type are generally known as rechargeable expenses, which are normally charged directly to your End Client.
Pure Business Expenses
These are forms of expenses incurred in the course of running your day-to-day business and we process these along with your pay. You may want to know that these forms of expenses will not be subject to Tax and NIC.
Rechargeable Expenses
You may have expenses you incur in the course of running your day-to-day business and these expenses would have been known and authorised by your end Client or Agency and such expenses will be fully reimbursed by them. Rechargeable Expenses can include a wide range of items and/or services and must be clearly, stated, identifiable and agreed with your end Client or Agency before the start of any contract. We will therefore ensure that such expenses are reimbursed to you in full.
It important to note that rechargeable expenses should be submitted at the same time and for the same period as your timesheets, as this will enable us to your Agency/Client on the same invoice and paid accordingly.
Please note that there are no set rules regarding the type or amount of rechargeable expenses you can claim simply because they form part of the agreement between you and your Agency/Client and these should be agreed at the beginning of the contract. You should always agree what, if anything, you can claim and how you go about making this claim before you start your contract; this should all be discussed in your contract negotiations.
SRM Payroll policy on claiming pure business expenses
If your expense claims are to be processed and paid timely, you should understand and carefully take note of the following points:
- All expenses claims must only be wholly, exclusively and necessarily in the performance of your contractual duties.
- Expense claims should always cover the same period as the timesheet being submitted and it should not overlap.
- Travel and subsistence claims relating to any one particular location that you have already worked at or know you will probably work at, for more than 24 consecutive months should not be submitted as these will not be consistent with HMRC guidelines.
- Necessary supporting evidence associated with a particular claim, such as receipts and proof of purchase or usage should be available upon request.
Business mileage
Under HMRC current mileage guidelines one can claim 45p per mile for the first 10,000 business miles you do in your own vehicle each tax year and 25p per mile thereafter.
Please note that mileage includes travelling to and from temporary workplaces you may be required to visit. It is vital to have a mileage log which must be completed and submitted to SRM Payroll, along with your expense form.
Daily food & drink claims
SRM Payroll uses a system of scale rate expenses, in relation to subsistence expenses and our system is consistent to what has been specified by HMRC. Subsistence expenses can be claimed whilst on contract if it meets the qualifying criteria and has been incurred in the course of business
Through this system, SRM Payroll acknowledges that if a contractor has incurred subsistence expenses whilst on an allowable business engagement, employers are able to make Tax and NICs free payments up to the specified rates allowed. Thus, as a contractor, you are entitled to make a claim for allowances to cover meals. However, it is important to state that claimable amount is principally based on the number of hours worked on that particular day at a given temporary workplace.
The eligibility test on claiming these expenses lies on the ability to show that you have met the qualifying criteria specified for every expense you claim, as highlighted in the illustrative table below.
Overnight accommodation
SRM Payroll acknowledges that you can legitimately claim for reasonable accommodation expenses for overnight stays away from home if these will be incidental or are required as part of your contract.
Caution must be taken that if you are claiming accommodation rental costs, you must provide the original signed rental agreement, which must meet HMRC Dual Purpose rules, stating that you are only claiming for the working week. Claims are subject to the temporary workplace rule and where you are staying at a hotel or a B&B, the full cost for the room, excluding meals, room service and beverages, will be allowable for tax purposes.
It is imperative that proof of overnight stay at a location other than your correspondence address will be required, including the period/length of stay that was charged for, and a justification why an overnight stay was necessary.
Incidental Overnight Expenses
Where you are required to stay away from your home and overnight, as part of a qualifying business journey, you may make a claim for an ‘Incidental Overnight Expense’ (IOE) for each night of your required stay. The amounts you can claim, which are tax and NIC free, are:
- £5 per night for each overnight stay anywhere in the UK (GB & NI)
- £10 per night for each overnight stay outside of the UK
SRM Payroll appreciates that the claim is to cover sundry personal expenses incidental to you being away from home, whilst visiting a temporary workplace, and may include items such as newspapers, telephone calls home, laundry, rental of films and refreshments.
You do not have to incur expenditure up to these limits and receipts are not required, however any amounts incurred in excess may not be claimed and SRM Payroll suggest you retain any expense receipts to prove an expense was incurred and you did stay overnight.
Tube, bus, rail, ferry, taxi and air travel
Any other travel costs to and from your temporary place of work may be claimed as long as receipts are provided. Oyster ticket costs can be claimed, though SRM Payroll recommend you top them up at a manned kiosk, where you can request a receipt. Automated top up machines do not normally issue a receipt so can cause problems. When using budget airlines, both original tickets and online receipts are acceptable.
Associated travel costs
Road, bridge and tunnel tolls and congestion charges incurred while travelling on business may be claimed. However, original receipts are required for all claims. Speeding, parking or clamping fines and penalties are disallowable and therefore cannot be claimed.
Parking charges
Parking fees can be claimed as long as they are supported by a receipt or ticket detailing the time and date. These must correspond to another claim for travel such as a journey you are claiming mileage or other travel costs for. All parking costs must be related to work carried out for the sole purpose of your contract.
Training courses and tuition
Training courses, tuition or seminars necessary for your current working contract, whilst in employment with SRM Payroll, can be claimed as long as you supply a receipt for the full amount, details of your current job description and the name and description of the training course/tuition.
SRM Payroll acknowledges that training courses and tuition may be allowable when updating skills which must be relevant to your contract, but will be considered as disallowable when learning new ones. Degree courses are generally disallowable as claimable expenses.
Manuals and textbooks
A reasonable amount may be claimed to cover the cost of manuals and textbooks required for business purposes. Receipts are required in all cases and must be accompanied by a letter of rationale.
Manuals and textbooks may be allowable when updating skills which must be relevant to your contract, but these will be disallowable when learning new ones.
Telephone and mobile communications
Business related telephone calls from a landline or mobile phone are claimable, but a copy of an itemised bill must be made available when required.
Professional memberships and subscriptions
Professional association memberships can be claimed, providing that the professional body is on the list approved by HMRC. Visit www.hmrc.gov.uk/list3 for further details. Please note that subscriptions to trade journals and magazines are not claimable.
Postage, office consumables and stationary
The cost of business-related postage, including that relating to any form of documentation with SRM Payroll, is claimable.
Office consumables, including printer ink, pens etc and any stationery you use for business purposes may be claimed. However, the total cost must be reasonable and you will need to provide original receipts to validate your claim.
Protective, speciality clothing
SRM Payroll is clear that you can only make a claim on specialist protective clothing if it is a requirement due to the nature of your work and it must not be suitable for everyday wear outside your working environment. It is imperative that proof of purchase will be required.
SRM Payroll safeguarding you
As an Umbrella company that puts compliancy and safeguarding of our valuable contractors above and beyond everything else we do, our compliance team will undertake audits of the expense claims you submit from time to time to ensure you are not in error by claiming certain expenses which are disallowable.
In pursuance of our compliance and safeguarding roles, expenses wrongly claimed will be disallowed or revoked and any tax underpayment will be deducted from your next payment.
Although SRM Payroll will not need to see receipts in order to process certain items, we categorically encourage you to keep in a secure place all the receipts for the expenses you have claimed, should we or HMRC select you as part of the auditing process