Accountant says I can't claim travel expenses

[paragon]

Hi, I'm a software developer contractor. I only recently started contracting and my first gig is a 3 month fixed term project. I've been trying to understand all the legalities and rules but I'm getting conflicting advice. I hired an accountant but I don't think she specialises in IT contractors and she's giving me conflicting advice to what I read on the CUK website. I am director of a limited company and I'm the only employee.

My contract with the client is very careful to not imply that I am an employee. I don't have a desk or office I have to be at, I work what ever hours I want, as long as I get the work done. I'm there to deliver a specific project and it's a fixed term/price contract. I charge by the day.

I drive to the client's premises mostly every Mon, Wed, Fri for a few hours to chat about the progress of the project and demo my work. I go home after lunch and continue to work from home. On Tues and Thurs I work from home. It's important to point out that I chose these days to see the client because it suits my schedule. The client did not ask me to come in on any particular days. I have worked bank holidays from home when the permanent staff were off. I've worked at weekends because it suited me. Occasionally I don't go in on a Monday (or Wed or Fri) if I need to do something else at home. I inform the client when I do that but I don't need their permission.

My accountant is saying that because I go to the client's offices on a regular basis, I could be seen as an employee of the client, and therefore I cannot claim my car travel expenses at 45p per mile. She said that if I went on on irregular days, e.g. Mon this week, and Thurs next week, and Tues the week after that, then I wouldn't be seen as an employee. Is she just covering her arse?

My understanding is that going to a client's premises can be unavoidable if you work in software development, especially if working with sensitive data or you have to work on the client's systems, and doesn't automatically make you an employee. And even if I fall into IR35 I can still claim travel expenses according to the CUK website. Although, I rang someone at SJD Accountancy and she said that from April 2016 contractors who fall into IR35 cannot claim travel expenses. Is that true?

After this contract finishes I might have another lined up in London. It would be a long term contract, possibly 6 months rolling, to work on various large projects. I would need to get the train into London at £60 a day. I've agreed with this potential client that I can go in to their offices 2 days week to have a catch up, The other 3 days I'm going to London for training (not related to the client). So now I'm worried that I can't claim any of my train tickets as expenses. It's a lot of money! My accountant says that because the contract could go on for 2 years, I definitely would be classed as an employee. She seems to think that whether or not I fall into IR35 is all about how often I go to the client's premises and how long the contract is for.

To summarise:
My current contract - can I claim my mileage expenses?
My next contract - can I claim my train costs?


Thanks in advance,
a very frustrated developer

[WTFH]

To summarise: you need a new accountant.

Until you know the contract is going to be over 2 years, you can claim expenses.

[NotAllThere]

Your accountant is wrong in so many ways. Expenses is nothing to do with being considered to be an employee. The rules apply to contractors and permies. What matters is your permanent place of work.

You can't claim the expenses (or rather, you may have to repay them) if it's the only contract you do between two permanent positions. Otherwise it comes under the temporary workplace rules.

My current contract - can I claim my mileage expenses? Yes - subject to the above
My next contract - can I claim my train costs? Yes.

[Kenny@MyAccountantFriend]

If caught by IR35 you would not be able to claim for your travel costs as of April 2016.

Prior to this you could offset the expenses.

Also as the others have said you can claim travel for the current contract and the potential contract as well.

[TheFaQQer]

To summarise:
My current contract - can I claim my mileage expenses?
My next contract - can I claim my train costs?

Possibly, and possibly.

There are a few things to consider before you can categorically decide whether you can or can't claim travel and subsistence. Firstly, you refer to a "fixed term contract" - is that really what you mean, or do you mean that it's a contract that ends in three months time? Because they are very different.

Secondly, is the location that you travel to a temporary workplace? If it isn't, then you cannot claim travel and subsistence expenses because it is deemed to be normal commuting to work. If it is a temporary workplace, and you haven't spent more than 40% of your time there (and by there I mean in the same geographical location) in the previous two years, then you should be OK to claim expenses. As soon as you know that this will change (eg. the client gives you a two year contract today), then you must stop claiming expenses. Also, if you only complete one contract, then you might need to consider whether that place was permanent or temporary and whether the expenses claimed are eligible for tax relief.

Thirdly, from April, you will need to know whether your assignment is inside IR35 or not. If you are inside IR35 then you cannot claim travel and subsistence expenses because you are considered by HMRC to be a disguised employee provided by a company who's primary occupation is in the supply of labour. If you are outside IR35, and all the above are OK, then you can continue to claim expenses.

Finally, you can claim any and all expenses you want from your company. The question that you need to ask is whether the expenses you claim attract any benefit in kind charge - if they do then it's probably not worth claiming them as you'll have to pay the tax on the expense anyway via your self assessment and declare it on your P11D at the end of the year.

From what you say about your accountant, I'd consider ditching her now before it's too late - I use InTouch and recommend them (if you speak to Louisa, mention my forum name). Also, I'd consider joining The Association of Independent Professionals and the Self-Employed (IPSE - join here) as you're starting out - lots of good advice, tax investigation cover, and business interruption cover to boot.

Oh, and welcome

[LondonManc]

Welcome to the forum, PM Kenny. I'm sure he'd appreciate the new business.

[BrilloPad]

Switch to QDOS or any other accountant.

Remember that accountants are not your friend. They are agents of HMRC.

[Louisa@InTouch]

I use InTouch and recommend them (if you speak to Louisa, mention my forum name).

Do you want a job? As you said it all.

You need to consider 40%/24 month rule when looking at if you can claim for travel and subsistence currently.
Post April 2016, you will need to consider your IR35 status - if you are outside of IR35 then no changes will apply.

Don't forget the rule is based on location, rather than the actual end client itself.

And as for IR35, I would suggest that you look at getting a contract review done and a professional to talk through your working conditions.

[paragon]

Thanks for the quick replies. I am shopping for a new accountant now. This is the problem with living in a rural small town and the only businesses are hairdressers and shops. The accountants aren't used to software contractors.

To answer some questions, my contract states:
"This Agreement shall commence on the Commencement Date and shall continue, subject to the provisions of this Agreement, for 3 months unless terminated earlier by either party giving to the other not less than 2 weeks’ written notice to terminate this Agreement."

And

"The Consultant shall be expected to provide services to the Client for a maximum total of 65 days during this Agreement"

So I would say that is a fixed term contract.

I looked up the definition of a temporary workplace. I've never been to the town where the client is based before, and probably never will again after this contract. And I spend less than 40% of my time at the client's premises so I'd say it is a temporary workplace.

I will definitely get my next contract reviewed before I start it.

[TheFaQQer]

So I would say that is a fixed term contract.

In this area, a fixed term contract implies that it's a fixed term employment contract - which is the worst of both worlds. You get the permie work and pay, and little rights to go with it, knowing that at the end of the contract you're out.

So - it's a three month contract, working in a temporary location, with every intention to continue working in this way for other clients. You can claim travel and subsistence expenses now.

If you're inside IR35, then you should stop claiming them from the start of the new tax year in April. If you're outside IR35, then you can continue until you hit the two year rule.

You don't need a local accountant - you need someone who can help you get started properly, give you the advice that you need, is there on the phone / email when you need them, and is reliable. That's why I use InTouch - I had a local accountant, who was incredibly expensive and ended up in a bit of a mess. In the same way that our clients pick the best resources they can find, regardless of their base office, I'd do the same with an accountant - I've never met mine, but I know how pleased I am with them.