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Bones
23rd October 2012, 11:45
As I understand it, if I complete only one contract with an umbrella company the tax man will regard me as NOT being a contractor and will be chasing me for allowances claimed during the period. I would therefore assume it is normal to remain with the umbrella company to at leased start another contract...yes?

LisaContractorUmbrella
23rd October 2012, 12:26
As I understand it, if I complete only one contract with an umbrella company the tax man will regard me as NOT being a contractor and will be chasing me for allowances claimed during the period. I would therefore assume it is normal to remain with the umbrella company to at leased start another contract...yes?

Not quite. In order to claim travel expenses you have to be travelling to a temporary location - your umbrella company should operate an overarching contract of employment which has the legal effect of taking a series of assignments and bringing them all under one employment so that each location is temporary. If, when you sign up with the umbrella, you only intend to complete one assignment it must, by default, become a permanent workplace and therefore travel expenses are not allowable.

Bones
23rd October 2012, 12:42
Not quite. In order to claim travel expenses you have to be travelling to a temporary location - your umbrella company should operate an overarching contract of employment which has the legal effect of taking a series of assignments and bringing them all under one employment so that each location is temporary. If, when you sign up with the umbrella, you only intend to complete one assignment it must, by default, become a permanent workplace and therefore travel expenses are not allowable.

How is that answer related to my question?

I have already stated my intension to complete more than one contract position.

The Spartan
23rd October 2012, 12:45
What happens if you complete your first contract and then you are offered a contract abroad?

Sockpuppet
23rd October 2012, 12:45
You are correct. However staying for a week just to get the "more than one employment" tick won't work as leaving will be a big flag to HMRC should you be investigated. Also they'll regard you leaving one employment and going to another as friday-monday with regards to IR35. IMO

northernladuk
23rd October 2012, 12:47
How is that answer related to my question?

I have already stated my intension to complete more than one contract position.

Appears to answer your question perfectly to me. Have you tried reading it again.

LisaContractorUmbrella
23rd October 2012, 12:51
How is that answer related to my question?

I have already stated my intension to complete more than one contract position.

Glad I bothered :eyes

Single assignment - no travel. More than one assignment through the same umbrella company - travel allowable up to 24 months.

LisaContractorUmbrella
23rd October 2012, 12:52
Appears to answer your question perfectly to me. Have you tried reading it again.

Thanks NLUK - thought I'd missed something there for a minute :frown

greencabbage
23rd October 2012, 13:05
Not quite. In order to claim travel expenses you have to be travelling to a temporary location - your umbrella company should operate an overarching contract of employment which has the legal effect of taking a series of assignments and bringing them all under one employment so that each location is temporary. If, when you sign up with the umbrella, you only intend to complete one assignment it must, by default, become a permanent workplace and therefore travel expenses are not allowable.


So following on from this:
I am with an umbrella, I completed contract term 1 and have signed extension (term 2), I cannot treat this as a seperate assignment even if the terms of service are different, due to the location clause, as in - for now this is my permanent workplace?


That being said, if I don't want to repay tax on expenses, I would need to have another contract at a different location / clientco through the umbrella before setting up a ltd (if that is the way I choose to go)

(Note, I am new to this, have read the info on site and used the search, oh what a joyous task that is!!! :), I am just trying to clarify if I have understood it.)

The Spartan
23rd October 2012, 13:10
Single assignment - no travel. More than one assignment through the same umbrella company - travel allowable up to 24 months.

What if the umbrella company cannot support you for a particular assignment say for instance in Europe?

northernladuk
23rd October 2012, 13:17
Thanks NLUK - thought I'd missed something there for a minute :frown

Nope, you did that thing where you are too helpful when the OP just wants the answer he wants to see... if that makes sense.

LisaContractorUmbrella
23rd October 2012, 13:20
Nope, you did that thing where you are too helpful when the OP just wants the answer he wants to see... if that makes sense.

I know exactly what you mean - selective intelligence :wink

LisaContractorUmbrella
23rd October 2012, 14:38
What if the umbrella company cannot support you for a particular assignment say for instance in Europe?

For most European countries, with contracts of less than 6 months, you will remain within the UK tax system so the umbrella company will still be able to help you - there are exceptions eg. Netherlands but not many.

With regard to the wider question, this is a fine point - HMR&C guidance states that it has to be an individual's 'intention' to complete more than one assignment and therefore if you intended to complete more than one assignment but were unable to because eg. you secured a contract in the Netherlands then the expenses shouldn't be restrospectively disallowed as the original intention was there

HTH :happy

Bones
23rd October 2012, 14:58
The question seems pretty clear, as I have stated, as far as I understand, it is a bad idea to work through an umbrella company for only one contract position, for tax reasons. It would therefore seem normal to remain with the umbrella company and seek further contracts after the first had ended, would it not?

northernladuk
23rd October 2012, 15:06
The question seems pretty clear, as I have stated, as far as I understand, it is a bad idea to work through an umbrella company for only one contract position, for tax reasons. It would therefore seem normal to remain with the umbrella company and seek further contracts after the first had ended, would it not?

Depends on what you are after. Many people pick an Umbrella for a single gig as it is a lot less hassle than starting up a LTD for one contract. They can't claim mileage but they may not need to for a number of reasons. There maybe other restrictions I don't know about but it is still a viable option if someone is going to do a single 6 monther for whatever reason.

If you are going to start a contracting career then you won't have just one gig anyway but the advantages of opening a LTD may outway the disadvantage of stopping using the umbrella for one gig. Some people may take the hit to go LTD, some people may stay with Umbrella cause it is easier.

Depends on what is important to you, the money, the ease of the solution, your time, your knowledge of finainces etc etc. You can't just write it off as a bad idea as that might suit someone else. Horses for courses. There isn't just one solution that fits all that you can call bad or good.

LisaContractorUmbrella
23rd October 2012, 15:48
Are we all talking in a foreign language here :confused:

Bones
23rd October 2012, 16:45
Depends on what you are after. Many people pick an Umbrella for a single gig as it is a lot less hassle than starting up a LTD for one contract. They can't claim mileage but they may not need to for a number of reasons. There maybe other restrictions I don't know about but it is still a viable option if someone is going to do a single 6 monther for whatever reason.

If you are going to start a contracting career then you won't have just one gig anyway but the advantages of opening a LTD may outway the disadvantage of stopping using the umbrella for one gig. Some people may take the hit to go LTD, some people may stay with Umbrella cause it is easier.

Depends on what is important to you, the money, the ease of the solution, your time, your knowledge of finainces etc etc. You can't just write it off as a bad idea as that might suit someone else. Horses for courses. There isn't just one solution that fits all that you can call bad or good.

My intention was always to work multiple contracts through an umbrella company, for simplicity and still get the tax breaks, possibly considering LTD somewhere down the line as a future option. Having completed my first contract and informed the umbrella company I am wondering why they have sent me a letter of resignation to sign, ending my employment with themselves when they must know this will result in the tax man wanting all of the allowances back? This would not seem to be a normal course of action for most people working through an umbrella company. So why would they assume I wasnt going to move on to another contract position? Why wouldnt they point out the financial implications of only completing one contract position, which would seem to be fairly basic guidance on the part of any decent umbrella company. Not that this company's guidance has been anything less than appalling so far! I am therefore VERY cautious ANYTHING they say.

I will of course be asking them but thought I would get opinions here first and clarify due process for something I have not done before.

captainham
23rd October 2012, 18:56
Maybe they assumed you'd be leaving because you hadn't told them different. Maybe you did tell them but they didn't have a clue what you were saying as communication doesn't appear to be your strong point. Maybe you told them, they understood fully but wanted to get shot of you anyway?

Could be any number of things, really.

Wanderer
23rd October 2012, 20:06
I am wondering why they have sent me a letter of resignation to sign, ending my employment with themselves when they must know this will result in the tax man wanting all of the allowances back? This would not seem to be a normal course of action for most people working through an umbrella company. So why would they assume I wasnt going to move on to another contract position?

Perhaps it's because they don't want to pay you while you are between engagements? I would be reluctant to sign the resignation letter, why should you? You may get a new contract tomorrow.

As for the expenses, the rule is that it must be your expectation that you will work on multiple contracts and at the same location for < 24 months. Since this was clearly the case, your expenses claims are valid and they aren't retrospectively invalidated. The tax man won't come after you, if anything they will go after the umbrella. Most likely nothing will happen so don't sweat it.

The Spartan
24th October 2012, 06:48
For most European countries, with contracts of less than 6 months, you will remain within the UK tax system so the umbrella company will still be able to help you - there are exceptions eg. Netherlands but not many.

With regard to the wider question, this is a fine point - HMR&C guidance states that it has to be an individual's 'intention' to complete more than one assignment and therefore if you intended to complete more than one assignment but were unable to because eg. you secured a contract in the Netherlands then the expenses shouldn't be restrospectively disallowed as the original intention was there

HTH :happy

Thanks Lisa as always you're awesome, that's what more or less happened to me except that I ended up on a 1 year contract in Switzerland

LisaContractorUmbrella
24th October 2012, 08:54
Thanks Lisa as always you're awesome, that's what more or less happened to me except that I ended up on a 1 year contract in Switzerland

Bless you Spartan :hug:

LisaContractorUmbrella
24th October 2012, 08:58
My intention was always to work multiple contracts through an umbrella company, for simplicity and still get the tax breaks, possibly considering LTD somewhere down the line as a future option. Having completed my first contract and informed the umbrella company I am wondering why they have sent me a letter of resignation to sign, ending my employment with themselves when they must know this will result in the tax man wanting all of the allowances back? This would not seem to be a normal course of action for most people working through an umbrella company. So why would they assume I wasnt going to move on to another contract position? Why wouldnt they point out the financial implications of only completing one contract position, which would seem to be fairly basic guidance on the part of any decent umbrella company. Not that this company's guidance has been anything less than appalling so far! I am therefore VERY cautious ANYTHING they say.

I will of course be asking them but thought I would get opinions here first and clarify due process for something I have not done before.

It is the intention that is important here - if it was your intention to work on more than one assignment through the umbrella company then the travel expenses were allowable and would not be revoked