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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Limited Company Entertainment Expenses

Limited Company Entertainment Expenses

You can claim for business entertaining but not for tax reasons.

Business people, from all size companies, entertain client and prospective clients in order to establish and build a personal relationship. This in turn helps to either get repeat business, or get a new sale in the first place.

Entertaining isn't done for tax relief advantages. Entertainment is not tax deductible and the worth of putting through your limited company is debateable.

Money Spent Wisely

Spending on entertaining is not allowable for corporation tax relief and there's no VAT input on claims. So you don't do it for the money.

If you're a contractor managing your own limited company you know very well the benefits of taking a key influencer or decision maker of a potential client out to lunch. If you don't perhaps you should see our Guide to Winning New Business.

Hospitality

You are not allowed to claim business expenses for hospitality of any kind, nor can you buy gifts for clients. Apart from, that is two specific scenarios:

  1. Gifts (other than food, drink, tobacco or vouchers) bearing an obvious promotional advert and which costs less than £50 per person per annum
  2. Expenditure on staff functions, up to £150 per person per annum

Don't Forget P11D

Any expenses reimbursed to an employee by their employer must be declared on form P11D, together with a corresponding business expense form.

This comes under the compliance and disclosure heading. In reality it's unlikely a contractor will have to do that much entertaining, so this is not a big hit.

Is it Worth Claiming?

It's worth entertaining but it's not worth putting the costs through your company. It is not allowable for corporation tax relief and there's no VAT benefit.

You may as well enjoy the meal and do your best to engage, entertain and win over your guest!

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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.