Umbrella Company Expenses Guide
Here is our guide to umbrella company expenses and what contractors can claim.
Contractors whom IR35 catches, or who just do not want the hassle of looking after their business, with all the paperwork involved, usually end up in an Umbrella Company. They can claim a limited amount of expenses which they can lay off against tax using one of these.
If you are working away from home you can claim hotel or B&B accommodation as well as an evening meal. However, you can‘t claim lunch as it could be argued you would have that anyway. Few contractors are in a position to nip home for lunch. In April 2016 Chancellor Osborne changed this. It can now only be claimed by contractors who are outside IR35.
Unlike permanent employees Umbrella Company contractors can claim travel expenses. You can claim any travel by bus, tube or train but remember to keep your receipts. Those using cars can claim mileage of 45p per mile up to 10,000 miles and 25p per mile after that. Ex-Chancellor Osborne also changed this. It is only contractors outside of IR35 who can now claim this.
Training expenses can be claimed. However, this is made more difficult in that the training has to be related to the contract that you are currently on. You can’t upgrade your skills between contracts and expect to claim the training expenses aganst tax. If you went on a training course in the middle of a contract, or you managed to get a client to take you on provided you took a course on one of the skills needed, then this would qualify as expenses that you can pay off against tax.
However, this is not something that happens much with contractors. Of course, if you took a course that then enabled you to get a contract using those skills soon after, you might and might not be able to wangle it.
PCs and Other Equipment
Buying a PC is not allowed as legitimate umbrella company expenses normally. They would only allow it if it was necessary for the contract you are currently on – and only that contract. Of course, if you are in the one place for a long time and your PC was only ever used there then you could claim that it was for that specific contract.
They would only permit you to claim for a mobile phone if you used it only to communicate on that specific contract. So, in normal circumstances, you couldn‘t claim it.
If you pay annual fees to a body like the Professional Contractors Group you can claim that as legitimate umbrella company expenses.
Pensions are wholly allowable against tax. Contractors can cut down on their tax and their National Insurance contributions by taking out a pension. For a good pension plan for contractors click here Contactor Pensions
Charity Donations are wholly allowable against tax. That’s as long as they are going to a legitimate and recognised charity and not to a mate in hard times.