Help!! Newbie very confused about Expenses

[alfatech]

Hi

Im all new to contracting so don't really know how things work. At the moment i am contracting through my limited company and i know the various expenses that i can claim back working this way.

my agency pays my wages once my timesheets have been approved by the client.

My question is that how do i claim my expenses back that i have incurred. in the other words, who do i bill for the expenses?

<mod not>Be gentle please</mod note>

[Peoplesoft bloke]

Depends what is in your contract(s). Mine don't usually pay expenses, so I spend on my private cards and claim from my limited co - I keep records on a spreadsheet. My Ltdco then transfers the expenses to my private account.

[scooterscot]

You really should search through the form the answers are out there...

A number of the contractors here use the servics of SJD, including myself. Everything you need to know regarding expenses is in here.

[Jaws]

Do you have an accountant for your limited? I normally send my invoices and filled out expense claim forms (which my accountant provides) to the accountant at the end of each month. I use my company account cheque book to pay myself any expenses incurred (those which I paid with my personal money) and wait for my accountants to send me the pay slip to pay myself, again using the company account cheque book, based on the figures they provide.

If you don't have an accountant, you really should get one!

[expat]

Hi

Im all new to contracting so don't really know how things work. At the moment i am contracting through my limited company and i know the various expenses that i can claim back working this way.

my agency pays my wages once my timesheets have been approved by the client.

My question is that how do i claim my expenses back that i have incurred. in the other words, who do i bill for the expenses?

<mod not>Be gentle please</mod note>

You can claim back the expenses from your Ltd Company. Yes, that does leave it with less money to pay you as salary or dividends.

Normally neither you nor your Ltd Co can claim expenses back from anybody who didn't say that you could. That is, your contract might say that you can claim back exoenses, from the clientm or from the agency - but it probably doesn't say that. If nobody has agreed to pay you expenses, then they won't.

And your agency doesn't pay your wages, it pays your Ltd Co its invoices. Your Ltd Co pays you your wages. The distinction is important in a number of ways, but right now in the sense that it shows that you personally are paid by your Ltd Co, not by anybody else. Your Ltd Co is paid by the agent, who (I repeat) will not pay your Ltd Co anything that they have not agreed to pay it.

[alfatech]

i have an accountant but he just confused the hell out of me today.

i don't really understand how all this works so i will give you an example:

say i have incurred a business expense of £50 for buying business cards, that money has come out of my pocket so i am down £50. I can't invoice this to the client that i am working for because it is not directly related to that contract. so how do i get my £50 back. I know i fill this out on a expense form that goes to my accountant with the reciepts, that makes sense. But what is the process of getting that £50 back to me?

My accountant was saying that i withdraw the money out of my business bank account and put it into my personal account. But the money in my business bank account is mine anyway. i am still £50 out of pocket.

please help there is something that i am really not getting here!!!

[HairyArsedBloke]

Remember that your ltd company can spend its money on anything that the directors, i.e. you, want; even annual membership to Peppermint Hippo if that is your bag. As to if that expense is allowed before tax is a separate matter.

You have to get the worker/wages thing out of your head. That path leads to suffering. Another thing is that of the idea of ‘your agent’. He is not an agent for you; he is acting for the end client. Contracting (I was one, now I am a ‘proper business’) is a completely different mindset.

[alfatech]

You can claim back the expenses from your Ltd Company. Yes, that does leave it with less money to pay you as salary or dividends.

Normally neither you nor your Ltd Co can claim expenses back from anybody who didn't say that you could. That is, your contract might say that you can claim back exoenses, from the clientm or from the agency - but it probably doesn't say that. If nobody has agreed to pay you expenses, then they won't.

And your agency doesn't pay your wages, it pays your Ltd Co its invoices. Your Ltd Co pays you your wages. The distinction is important in a number of ways, but right now in the sense that it shows that you personally are paid by your Ltd Co, not by anybody else. Your Ltd Co is paid by the agent, who (I repeat) will not pay your Ltd Co anything that they have not agreed to pay it.

so am i right in saying that if an expense has not been agreed between myself and the agent/client then i don't actually get anything back?

The way im understanding it now is that you can claim back expenses from your own limited company but the only benefit to this is that it is not taxable. You don't actually get your money back? because the money in the business is the money that i have earnt without any expenses paid and i just withdraw a portion out of that account and put it into my personal account (For business expense). I am not actually getting my expense back because i own the company and it is my money in there anyway?

[NickFitz]

My accountant was saying that i withdraw the money out of my business bank account and put it into my personal account. But the money in my business bank account is mine anyway. i am still £50 out of pocket.

That, right there, in bold red text, is what you're not getting.

The money in your company bank account isn't yours. It belongs to the company. Legally, the company is a separate entity to you - it's like a whole other person, and you are not that person. Think of it as your own personal Frankenstein's Monster if that helps you to visualise it better

You may own the company, but that doesn't mean you own its assets such as the money it has in the bank.

The company uses its money to pay its employees (just you in this case). It also uses its money to reimburse its employees' legitimate business expenditure (such as your £50 on business cards). The company has to pay tax on its earnings (not your earnings - you just work for the company, which then pays you your salary) and whatever profit is left over can then be paid out by the company as dividends to its shareholders (just you, I assume, as you probably are the only shareholder).

But under no circumstances is the money in the company's bank account "your money" - and if you regard it as such, you'll get into very deep trouble with the authorities very rapidly

[expat]

so am i right in saying that if an expense has not been agreed between myself and the agent/client then i don't actually get anything back?

The way im understanding it now is that you can claim back expenses from your own limited company but the only benefit to this is that it is not taxable. You don't actually get your money back? because the money in the business is the money that i have earnt without any expenses paid and i just withdraw a portion out of that account and put it into my personal account (For business expense). I am not actually getting my expense back because i own the company and it is my money in there anyway?

Spot-on.

What makes you think that anyone would pay you for the expenses in running your company? Who do you think would pay it back to you, the tooth fairy? Or do you just have a vague sense of entitlement....?