Umbrella Company Expenses

You Get More Than Nothing

Using the services of an umbrella company, not only do you get zero hassle, you also get the opportunity of paying less tax. You do this by claiming for various legitimate business expenses.

HMRC dictate exactly what business expenses are allowed. Currently included are such items as:

1. Professional subscriptions
2. Postage
3. Training costs

And There's More...

Another ‘key' expense is the cost of travel to your assignment, together with daily subsistence (food & drink).

Technical: employees who work from home are entitled to a tax deduction for the expense of travel to a temporary workplace; this includes the cost of any necessary meals & drinks (subsistence costs).

In English: contractors who work through an umbrella company are eligible to claim travel expenses. These are costs for travelling that are over & above any costs if you didn't have to travel. Travel to your client's site is an additional cost.

There's Always A ‘But'...

However, if you intend to work on just a single contract and then leave your umbrella company to go back to a full-time job, you would have to pay back the tax you had previously saved from your expenses.

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

Umbrella Companies Business Expenses Rule 1

You have employment rights through your employer, which is your umbrella company. Some of your rights are ‘statutory' rights, such as:

• Sick pay
• Maternity pay
• Paternity pay
• National minimum wage

Another set of rights are granted through your Contract of Employment from your umbrella company (things like: notice period, place of work, and terms & conditions of assignment).

Your umbrella company will provide you with assignment details for each contract you undertake.

Umbrella Companies Business Expenses Rule 2

You will use your home office to:

1. Find a new contract(s)
2. Update your skills & training
3. Is your base to travel to your contract(s)
4. Complete the umbrella company paperwork for your current contract

Therefore your contract(s) takes place at temporary workplace

This is important because:

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

Umbrella Companies Business Expenses Rule 3

Your umbrella company is your (legal) employer and obliged to check and authorise business expense claims and where possible verify claims with supporting evidence like a receipt. Read an introduction to an umbrella company if you are new to contracting.

Sometimes knowing what business expenses you can claim can be really confusing. If you get it wrong you end up paying more tax than you need to, or even worse, find that HMRC will ask you to pay back money for claiming the wrong expenses.

The best way for a contractor to remain within the law is to use the services of a reputable (approved) umbrella company. Get it right and you stay within law, and at the same time maximise your take home pay.

 

 1. What is contracting and how can I become a contractor?
 2. You've got the contract, what now?
 3. What is an umbrella company?
 4. Umbrella company myths
 5. Umbrella company FAQs
 6. Umbrella company paperwork
 7. Umbrella company expenses
 8. Calling an umbrella company
 9. 10 questions to ask your umbrella company
10. IR35
11. Paying Employer's National Insurance
12. Choosing an umbrella company
13. Umbrella company alternatives