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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Company Expense Meal Allowances Money for Nothing and Drinks for Free

Meal Allowances

Are meal allowances a legitimate expense? Yes - but it's not all Money for Nothing and Drinks for Free

Did you know the government (you) give money (by way of subsidy) to contractors for meals?

Why? Everyone has to eat whether they work as a permanent employee or as a contractor. And we eat whether it's during the working day or at the weekend.

Testing Times

The overriding test for any business expense is that it must be incurred wholly, exclusively and necessarily in performing the duties of the employment.

It's a stringent rule and when it comes to meals it's covered by travel legislation. 'Travel' includes both the cost of transport and meals.

If a contractor has to travel in order to carry out their duties it is an allowable expense.

Circular Reference

Can it be argued that a meal is part of the cost of travel? Perhaps, but only if the meal is an extra expense - that is if the individual would not have eaten if they had not travelled.

Is the travelling the reason a meal had to be bought? Does it mean more money had to be spent on the meal than would have been the case if not travelling?

It's really the extra expense that should be claimed, but in reality it's impossible to work out - so HMRC allow the full amount.

Draw the Line

Dont get over excited... There is no extra expense if a person takes a packed lunch from home!!!

HMRC will also argue that there is no extra expense if the person prepares their own sandwiches either at the workplace or at the accommodation if the person is working away from home.

In these circumstances the expense is incurred in order to live. It is not an extra expense attributable to travel. It is important to note that HMRC literature refers to the purchase of a meal.

HMRC will not accept that the purchase of ingredients will qualify as the purchase of a meal. They will not grant a dispensation in that respect and they will not accept such a claim from an individual.

It is the view of HMRC that it is a "meal that must be purchased."

Meal allowance expenses is about "keeping it realistic, deciding to submit a receipt for an Easter egg is not going to cut the mustard" explains one of our tax advisors.  "In the 27 years that I have worked with limited companies, contractors and the HMRC, I have seen a range of expenses which are sometimes ludicrous and bordering on bizarre. The best accounts are open and honest accounts.  If its a legitimate business expense, claim it.  If you have to try and justify the reasoning, the chances are its not."

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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.