Subsistence Expense Help

**malvolio** · 18 June 2009, 08:49

Simple (and legal) rule - you can only claim for expenses you have incurred. A receipt is a good way to prove you have incurred it.

If your umbrella is allowing you to claim as expenses money that you haven't spent and you are not showing that as earned income on your tax form, then you (not they) are committing tax evasion by not declaring that income. Expenses are not "tax free" income, they are only tax neutral since they are revenue neutral - you get back only what you've spent out, so there is no gain so there is no taxable income

So ignore their sales-induced nonsense, only claim for what you actually spend, becuase that's all you're entitled to. Otherwise you are breaking a couple of very serious laws.

HTH

**PhilAtBFCA** · 18 June 2009, 09:28

Expenses - Subsistence

I think you are right to be careful here.

When HMRC issued its subsistence guidance in April 09 we updated our guidance which is here

In this, when running your own Limited Company we advise that if the actual expense is less than the agreed HMRC subsistence allowance ( and there is a dispensation in force ) then an employee claims the lesser amount.

On a practical level, does it not seem unlikely that HMRC would be happy that an employee is encouraged to "profit" tax free from a dispensation agreement ? For instance the guidance is clear that if an employee takes a packed lunch, then there is no cost incurred and so no subsistence claim at all. Logic surely suggests that HMRC would view any "profit" from a dispensation being operated in this way as a taxable benefit you have received.

The HMRC subsistence guidance says that

What records would an employer need to keep?
An employer will need to keep sufficient records to be able to demonstrate that the employee was entitled to the payment. An employer also needs to be able to demonstrate that routine checks are undertaken to ensure that the travel expenses rules are being followed.

Is this consistent with

As part of the dispensation agreement with the Revenue the allowable subsistence is non-receipted, so if you were to have an audit like we did last year the Revenue would not ask, or even be able to ask for receipted proof for the subsistence as covered under the dispensation.

I am not so sure myself.

I would be most careful and consider your options. Whilst an employer has an obligation to deduct tax correctly from your remuneration it is your personal tax liability that could be at risk at the end of the day as well.

Phil

**ASB** · 18 June 2009, 09:57

There is another possibility. Scale Rates. This is a different regime which has recently been extended. You can find some current information about how scale rates etc work on HMRC website and also the sticky at the top of this page was recently updated.

**LisaContractorUmbrella** · 18 June 2009, 10:11

ASB is right that some companies do operate scale rates but the employee will still have to prove that an additional cost has been incurred. I belive HMR&C themselves introduced scale rates to reduce paperwork but, as I understand it, their employees have to sign an agreement when they claim scale rates that a cost has been incurred. e.g. if they normally spend £5 on lunch from M&S and they then go to a temporary workplace and still go to M&S and still spend £5 per day on lunch there is no additional cost and therefore the scale rate cannot be applied. If the agreement is signed and the scale rate claimed without an incurred cost the employee would be subject to disciplinary action.

As with any expense claim - if you haven't spent it you can't claim it

**draffyabc123** · 18 June 2009, 11:06

right thats cleared a few things up.
However, it looks as though the umbrella will not take my actual receipted expenses and only want to pay out the allowance.
I guess this is easier for them to do, and if there is any comeback from it, then thats on me not them!
I think its going to have to be a case of me ditching this company and either setting up with another, or setting up my own ltd company.

With regard to setting up my own ltd co, how hard is this to do?

**ASB** · 18 June 2009, 12:31

Originally posted by LisaContractorUmbrella View Post

ASB is right that some companies do operate scale rates but the employee will still have to prove that an additional cost has been incurred. I belive HMR&C themselves introduced scale rates to reduce paperwork but, as I understand it, their employees have to sign an agreement when they claim scale rates that a cost has been incurred. e.g. if they normally spend £5 on lunch from M&S and they then go to a temporary workplace and still go to M&S and still spend £5 per day on lunch there is no additional cost and therefore the scale rate cannot be applied. If the agreement is signed and the scale rate claimed without an incurred cost the employee would be subject to disciplinary action.

As with any expense claim - if you haven't spent it you can't claim it

One can make a reasonable profit with scale rates - provide one stays in a hovel and eats crap! But yes, the advantage is that provided you spend something extra then the scale rate is legitimately claimable. Of course the intent is that everybody claims a fair average and sampling should be used by the employer to monitor it. Thus if everybody stays in a hovel the scale rates allowable start to diminish.

**PhilAtBFCA** · 18 June 2009, 12:51

Setting Up A Company

With regard to setting up my own ltd co, how hard is this to do?

No its very simple, and does not cost very much , arround £25. But that is not always the point. IMHO in the current regulatory environment you really do need to want to run your own business and take responsibility for it.

There are some good Limited V Umbrella articles arround on CUK, I have a spreadsheet that does the numbers for you, if you PM me I will send it no obligation :-)

Phil

Subsistence Expense Help