Employment Status

Are you a contractor? If you work for someone else, it is important to know whether you are working for that person in an employed capacity or in a self-employed capacity as an independent contractor.

Your employment status will determine the charge to tax on income from your employment or self-employment. It will also determine the class of NICs, which are to be paid.

Umbrella Companies employ you for tax purposes and complete central returns for all their contractors. It's less hassle and more flexible for you but take home pay is typically less than that the limited company option.

The best option for you depends on your plans, 'one off' contract or 'contractor for life'? [Read More...]

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Temporary Workplace Definition

Ensure your workplace is deemed temporary

If you are a contractor, assessing your workplace status is extremely important. There are a number of rules set by HMRC which will determine whether you have the right to claim travel and subsistence expenses whilst you work. The rules heavily focus on whether your place of work can be classified as temporary or permanent.

Essentially, if your workplace is classified as being temporary, you have the right to claim travel and subsistence (depending on other qualifying rules like the '24 month rule'); however if HMRC believes your workplace to be permanent, your right to claim these expenses will end.

Overarching Employment Contract?

Having an overarching employment contract means you anticipate working on multiple assignments when working via an umbrella company.

With this type of contract in place, each place of work will be classified as temporary, which then permits you to claim travel and subsistence expenses as you work.

More than One Assignment

There have been cases where some contractors jump from one umbrella company service to another, working on just one assignment per umbrella company; however this poses some issues.

If you anticipate working on one assignment through your umbrella company, your workplace will be automatically classified as permanent meaning your right to claim travel and subsistence expenses would end.

With an overarching employment contract, you should anticipate working on multiple assignments with your , allowing you to claim these expenses.

Complying with the 24 month rule

As soon as you anticipate working at one place of work for more than 24 months, your right to claim travel and subsistence will end as your workplace will be deemed as permanent from that point onward.

E.g. you have been working at workplace 'A' for 18 months and your contract is renewed for a further seven months. From that point, you will no longer be eligible to claim travel and subsistence.

Resetting the 24 month rule

To reset the 24 month rule, you must start working at a new workplace deemed as ‘new'. HMRC have set two requirements which need to be met when establishing your workplace as being ‘new'. These requirements are;

  1. It must be at least 10 miles from the previous workplace
  2. The journey you take must be substantially different

E.g. you work at Workplace 'A' which is 18 miles away from your home. To get to work, you leave your home, turn right and travel up a straight road. You have been working at workplace 'A' for 18 months.

You now obtain a new assignment for 12 months at workplace 'B'. This workplace is also 18 miles from your home; however, to get to it you leave home, turn left and travel up a straight road.

In this example the journey you take on the new assignment is more than 10 miles from your last workplace and the journey taken is substantially different, thus your new workplace is classed as temporary and the 24 month rule is reset.

Running over the 24 month rule

If you have been working at one place of work for 24 months, you should cease claiming travel and subsistence expenses. Your umbrella company should have the necessary checks in place to monitor this. If you do continue to claim expenses, HMRC could claim back any tax liabilities that should have been paid for that period.

Summary

To ensure you remain eligible to claim travel and subsistence, please remember the following points;

  1. Ensure you have been issued with an overarching contract.
  2. You should anticipate working on more than just one assignment with your umbrella company.
  3. Ensure you comply with the 24 month rule.

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HMRC Compliance

It's the basics... Compliance with Tax, VAT, PAYE and fiscal arrangements is mandatory for contractors regardless of whether you use an umbrella company or your own limited company.

Incredible then that there are still rogue umbrella companies and limited company accountants who expose their contractors to fraud. Umbrella Compare provides THE solution, we thoroughly vet all umbrella companies and limited company accountants that we list [Read more...].

Umbrella Compare provides a holistic overview of contracting with the aim of helping new and old contractors find the right payroll solutions. Contracting should be about focusing on the contract, not payroll, accounting, HMRC and bureaucracy.