Are dinner expenses um... ethical? Are dinner expenses um... ethical? - Page 3
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  1. #21

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    Quote Originally Posted by Wanderer View Post
    Yes, we do know how it's done. It's a bit confusing at first.

    Normally an employer will reimburse your expenses on top of your wages but that is not the case here. Don't think of the umbrella as your "employer" because they aren't - you are actually self employed and all the umbrella does is run a payroll for you.

    So, let's say you earn £1000 per week and your net pay after tax deductions is £500.

    Now let's say you incur £100 in expenses (meals, travel, etc) for that week.

    If the expenses are allowed then you get that part of your income tax free so you pay tax on £1000 - £100 = £900. So the total tax due is £450 and your net pay is £1000 - £450 = £550 so you are £50 better off.

    The trick is that you probably would have incurred those same expenses working in a permie job anyway so you are a bit better off as self-employed because you can claim them as a tax free income.
    Assuming he intends to have more than one engagement with this umbrella company.

    All you are saving is 20% of what you spent since genuine expenses are not liable to tax on the money you earned to pay the original cost. But the basic sanity check is that if you make an overall profit from your expenses, you are probably doing something wrong.
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  2. #22

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    Quote Originally Posted by malvolio View Post
    Assuming he intends to have more than one engagement with this umbrella company.

    All you are saving is 20% of what you spent since genuine expenses are not liable to tax on the money you earned to pay the original cost. But the basic sanity check is that if you make an overall profit from your expenses, you are probably doing something wrong.
    If he's umbrella and on a decent day rate, it's likely to be a lot more than 20%.

  3. #23

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    Freaki Li Cuatre is too good to be a permie


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    Dinner?? Or lunch? Make yourself clear man.. There's a big difference.

    I suspect you're one of these common types who has dinner at lunchtime and tea at dinner time...

  4. #24

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    Quote Originally Posted by half View Post
    Thank you so much, that is profoundly helpful.
    I suppose I'm just fed up of explaining the same thing over and over again. Also, you posted this in General, not Accounting/Legal so it's fair game.

    Have a read of this thread. It's about expenses through a Ltd company but the key point is the same - there is no free money, who do you think is reimbursing the expense? Unless you have an explicit agreement with a client about expenses, it's not going to be them, it'll be you, therefore all you're saving is the tax.

  5. #25

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    CheeseSlice is a permanent contractor

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    I wonder if the OP is now wishing he didn't have a dozen oysters, lobster thermidor and a bottle of champagne for lunch every day for the last month?

  6. #26

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    Quote Originally Posted by CheeseSlice View Post
    I wonder if the OP is now wishing he didn't have a dozen oysters, lobster thermidor and a bottle of champagne for lunch every day for the last month?
    Isn't that standard for all contractors anyway?

  7. #27

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    Quote Originally Posted by Freaki Li Cuatre View Post
    Dinner?? Or lunch? Make yourself clear man.. There's a big difference.

    I suspect you're one of these common types who has dinner at lunchtime and tea at dinner time...
    You've stumbled upon one of my pet peeves. Tea is a caffeinated drink, made from tea leaves, of all things. Don't let me hear anybody calling lunch dinner, or...

  8. #28

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    Quote Originally Posted by Wanderer View Post
    Yes, we do know how it's done. It's a bit confusing at first.

    Normally an employer will reimburse your expenses on top of your wages but that is not the case here. Don't think of the umbrella as your "employer" because they aren't - you are actually self employed and all the umbrella does is run a payroll for you.

    So, let's say you earn £1000 per week and your net pay after tax deductions is £500.

    Now let's say you incur £100 in expenses (meals, travel, etc) for that week.

    If the expenses are allowed then you get that part of your income tax free so you pay tax on £1000 - £100 = £900. So the total tax due is £450 and your net pay is £1000 - £450 = £550 so you are £50 better off.

    The trick is that you probably would have incurred those same expenses working in a permie job anyway so you are a bit better off as self-employed because you can claim them as a tax free income.
    Thank you! Despite all the reading I'd done about it, it just didn't click. I eventually figured out that my reply, as mad as it sounded at first, was actually correct. Thanks for the detailed explanation!

  9. #29

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    Quote Originally Posted by LisaContractorUmbrella View Post
    Have a look here - this will explain it all for you EIM05231 - Employment income: scale rate expenses: subsistence expenses: table of benchmark scale rates

    Actually, as this is an HMRC link it probably won't explain very much at all but I can provide a translation if necessary
    Thank you. Been there, done that... just had the umbrella company's blurb in my head, confusing things.

  10. #30

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    Quote Originally Posted by Bunk View Post
    I suppose I'm just fed up of explaining the same thing over and over again. Also, you posted this in General, not Accounting/Legal so it's fair game.

    Have a read of this thread. It's about expenses through a Ltd company but the key point is the same - there is no free money, who do you think is reimbursing the expense? Unless you have an explicit agreement with a client about expenses, it's not going to be them, it'll be you, therefore all you're saving is the tax.
    That's what I didn't get. From what I'd been told, it sounded like someone would be reimbursing me, and that maybe that was just normal in contracting. Anyway, been there, done that as well, but thanks for the explanation and the link!
    Last edited by half; 22nd October 2013 at 06:32.

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