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Viewing Claiming Umbrella Company Expenses from 7 Umbrella Company Expenses - Umbrella Company Expenses Written by Contractor Supermarket

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Claiming Umbrella Company Expenses

Contractors join umbrella companies for many reasons: ease of use, reduced paperwork and convenience to name but a few. But some contractors think that by joining an umbrella company they will be able to start claiming for a variety of expenses which they won't actually incur.

By doing this the contractor believes they can increase their net pay (ie make a profit) without the tax man minding. This is incorrect and contravenes the tax laws (remember the MPs abuse).

If any umbrella company suggests to you their particular service offers you the ability to increase your take home pay by, for example, claiming for food even though you take a packed lunch in to work, your alarm bells should start to ring - and loudly.

Special Dispensation

Think about it, why would the tax man let you off paying your fair share of taxes just because you are a contractor? Aren't there permanent employees also taking in sandwiches for lunch - and do they get a tax break for that? No! And neither do contractors.

Everyone has to eat to live and therefore providing lunch cannot be wholly and exclusively for the performance of the contract, the definition of a claimable business expense.

Some umbrella companies may claim to have a special dispensation from HMRC which means they can offer their contractors a higher net pay than another umbrella company - through claiming expenses on things which the contractor has never even bought.

This is incorrect the contractor must have incurred the expense to claim the dispensation.

The actual cost may be below the value of the umbrella company dispensation and the contractor can claim the full value of the dispensation but the dispensation value cannot be claimed if no expenses has been incurred.

Some unscrupulous umbrella companies use opt out expense claim forms so that the contractor will automatically claim the dispensation each day unless he specifically disclaims it!

There are some umbrella companies that have a special dispensation. An umbrella company may well have been granted a dispensation by HMRC based on historical expenses data specific to that company.

Expenses can Reduce your Tax Bill

A dispensation simply reduces the amount of paperwork the umbrella company has to complete, it enables the contractor to claim the dispensation value of business expenses each time they incur expenses without the need to provide receipts.

Jim Goddard, from Contractor Supermarket featured umbrella company Oriel Contractors, states

"Contractors can claim expenses, which will reduce their tax bill, but any money claimed back must have actually been spent in the first place and wholly as a result of fulfilling the contract - the test is whether the expense is incurred in the performance of the duties of the employment.

"An umbrella company is by far the easiest way for a contractor to trade. This is because the contractor gets tax deducted at source and the ability to offset genuine business expenses. Therefore he does not have to worry about paying his taxes at the end of the tax year all the administration is completed by the umbrella company and they will provide statutory insurances."

A contractor working on a temporary contract is better off using the services of an umbrella company, rather than having the cost, legal responsibilities and paperwork burden of running their own limited company. Contractor Supermarket allows you to compare the service, price & customer feedback of the top 100 umbrella companies.

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written on2010-08-22 00:14:19

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