Expenses - confusion

[lmw]

I'm new to contracting and I'm trying get my head around qualifying expenses.

I've spent a lot of time reading different articles, forums, HMRC website and speaking with my accountant/account manager. But still, I find contradicting information.

So, I would like to provide my scenario and would be grateful for feedback.

As I mentioned, this is my first contract - 1 month into a 3 month contract. I am an IT Contractor, set up as a Limited Company.

My contract is outside of IR35.

I leave my home at 6.25 everyday to commute into London and get to the client's office by 8.45.
I leave at about 17.15 and arrive home around 7.30.

I claim for my Monthly Train Season Ticket.
I claim for morning coffee that I pick up on the way to the office, sometimes including a pastry.
I claim for lunch, generally less than £5, but sometimes just less than £10. I occasionally have a bigger lunch with colleagues, which can be over £10.

I use one of the large online accountancy firms. My accountant / account manager has said that all of these expense claims are absolutely fine. They are all "reasonable" expenses to a temporary place of work.

But what I still cannot understand is why there are so many other Contractors out there who do not claim these expenses and have indeed been recommended by their accountants not to.

I was also totally confused by HMRCs hours and amounts benchmarks (HM Revenue & Customs: Revenue & Customs Brief 24/09) that my accountancy firm said are out of date and that their stance was up to date as follows:

- You can only claim for meals purchased whilst performing your work.

- There is no set limit on the cost of the meal, providing the cost is ‘reasonable’

- Meals other than lunch can be claimed, but within reason. As a guide, breakfast should only be claimed if you start work before 9am, and to claim dinner a good rule of thumb would be not to claim for this unless you have to work until 7pm.

I just want to ensure that I am only claiming for what I am allowed to claim for.

Thanks in advance.

[Clare@InTouch]

Whether or not you can claim for travel and subsistence depends on your own circumstances. If you are travelling to a temporary workplace, and you have expectations of future contracts, you can claim. However you must cease to claim when you know you're going to be at the same site for more than 24 months, unless you spend less than 40% of your time there, as it ceases to be temporary at that point. The other people you refer to may be caught by that rule.

Always go careful about comparing yourself to other people, as their individual circumstances may differ and the advice will therefore differ.

If you're out on business you can claim the cost of any food bought whilst out. If you have a dispensation in place then you can claim a flat amount rather than the actual spent:

EIM05231 - Employment income: scale rate expenses: subsistence expenses: table of benchmark scale rates

[TheCyclingProgrammer]

Worth reiterating that you do have to have permission from HMRC to apply scale rates. They are useful for bigger employers like umbrellas as it reduces their admin.

But yes, as long as your clients office qualifies as a temporary workplace (see Clare's post) you can claim travel costs and any related subsistence such as lunch or coffee although personally I wouldn't bother claiming coffee; it's just extra receipts to hold on to and process for very little savings.

Season tickets are normally fine too as long as it costs less than if you were paying for individual journeys.

[LisaContractorUmbrella]

If it's any consolation HMRC's guidance on anything confuses everyone

You need to look at HMRC's definition of a temporary workplace. You'll find the basics here:EIM32080 - Travel expenses: travel for necessary attendance: definitions: temporary workplace: limited duration, the 24 month rule and then if you follow the other ESM links within the page you will get a more detailed view

[TheFaQQer]

If it's any consolation HMRC's guidance on everything confuses everyone

FTFY

[LisaContractorUmbrella]

So true

[lmw]

Thank you all very much for your replies and help

[CloudWalker]

Expenses are confusing, period !
We had a guy who would buy loads of things to "put through the business" as he was convinced the government were paying for them.
The Government doesn't pay for them! Your Business pays for them, and the expense amount is then deducted from your profits. And you only pay tax on the company profit.

[malvolio]

Expenses are confusing, period !
We had a guy who would buy loads of things to "put through the business" as he was convinced the government were paying for them.
The Government doesn't pay for them! Your Business pays for them, and the expense amount is then deducted from your profits. And you only pay tax on the company profit.

And if you make a profit from them you're doing something wrong, and potentially very illegal. As a general rule you can only claim what you spend; the other option is to claim what has been agreed with HMRC you can claim (aka Scale Rates or Dispensations) but even then, if the scale rate is, shall we say, over-generous (I've seen one brolly allowing both there-and-back mileage and overnight expenses claims for the same day's work...) you will be in trouble.

And, of course, everything claimed has to be wholly and exclusively for business reasons; your Savile Row suit and the 54" plasma monitor won't count.

[Contreras]

But what I still cannot understand is why there are so many other Contractors out there who do not claim these expenses and have indeed been recommended by their accountants not to.

I was also totally confused by HMRCs hours and amounts benchmarks (HM Revenue & Customs: Revenue & Customs Brief 24/09) that my accountancy firm said are out of date ...

The confusion arises because you can only apply the benchmark rates if you have dispensation from HMRC to do so.

It's further confused because there are benchmark rates for travel outside of the UK which do not require dispensation.

Also not to be confused with the statutory rate for 'incidentals', no receipts required, if you have an overnight stay.

What you are doing is claiming business travel expenses. By rule of thumb if you're legitimately claiming mileage or travel then subsistence is a valid claim too.

As to why some contractors don't claim. Bed-wetting or ignorance of the rules perhaps? Worried that it'll attract the wrong attention from HMRC? Or that saving £1 in every £5 isn't enough to bother with the admin for small expenses? All of the above? Personally I only claim for meals if staying away.