E1 Umbrella Company Expenses

Three Steps to Claiming Business Expenses through an Umbrella Company

When you do start contracting you'll have plenty of reasons to join an umbrella company: they're simple, cheap and hassle-lite. The umbrella company service is also a means to reducing your tax by way of claiming business expenses.

HMRC decide what expenditure can be classified as a legitamate business expense, not the umbrella company. Each umbrella company is bound by exactlty the same rules. It's a myth that one umbrella company can offer a wider choice of expenses than another - they can't.

Business expenses include things like travel, daily subsistence and training.

Umbrella Company Expenses

If you're using the service of an umbrella company can claim the cost of travel to the client's premises, as well as certain costs for food & drink.

However, if it's your plan to do just a single one-off contract and then leave your umbrella company you're not entitled to claim any expenses.

This is because a one-off contract role would be deemed as your permanent workplace, and travel between home and office is treated as normal commuting - not an allowable business expense.

Business Expenses Rule 1

You have certain rights as an employee (eg National Minimum Wage and Sick Pay), and you have other rights (eg place of work) depending on your umbrella company contract of employment. Contractually, your umbrella company will provide you with various contract assignments to complete (these are the contract roles YOU get!).

As the place of work is temporary you may claim travel costs as expenses.

Business Expenses Rule 2

You will set up an office at home and use your home office to:

• Find new jobs
• Training
• Use as a base to travel to your contract(s)
• Complete any paperwork as required by your umbrella company

Your contract roles therefore take place at temporary workplaces. This is important because:

You can claim an allowance for use of your ‘home as office' - which is free of tax and an allowance for business travel to a temporary workplace (your contract location).

Business Expenses Rule 3

Your umbrella company is required to check & validate business expense claims and where possible verify claims with receipts.

In some instances the umbrella company is allowed to pay some expenses at scale rates. It is not intended to make you a profit.

At the out-set knowing what business expenses you can claim can be confusing. Often, the best way to keep within the law is to use an umbrella company.

You get access to free legal advice from experts whose job it is to stay right up to date with HMRC legislation - as well as everything else!

Additional information:

• Claiming Umbrella Company Expenses
• Do Umbrella Companies Benefit Contractors
• Do Umbrella Companies Reduce Tax
• Is an Umbrella Company my Best Choice
• Quick Guide to Umbrella Companies
• Temporary Workplace Is Yours
• Umbrella Company Business Expenses
• Umbrella Company Expenses
• Up Your Pay Down Your Tax