In an effort to ensure that compliance remains at the heart of ContractorUmbrella's business practice, our Compliance Manager, Roger Westlake has asked for clarification on certain aspects of working through an umbrella company and where some umbrella companies may be leaving contractors at risk of investigation.
The first topic covered is that of Claiming expenses through an umbrella company once a notice letter has been received.
HMRC can appreciate why it can appear that the temporary workplace rules so complicated and difficult to understand and as you suggest a grey area. In response to your enquiry, if a worker has fulfilled a number of assignments, each of which was properly regarded as being fulfilled at a temporary workplace, we would not penalise the worker by regarding the final workplace as a permanent one just because during their period of attendance at that place their intentions changed and they sought to bring that employment to an end. We would look at the period of employment as a whole and provided the intention had been to attend a series of temporary workplaces, and this had been demonstrated throughout the employment, we would not regard the final workplace as permanent. The worker will still be regarded as attending that final workplace for the purpose of performing a task of limited duration or for a temporary purpose.
So what does this mean for the Umbrella Company?
In short if an employee has fulfilled more than one assignment then you can allow expenses during the notice period on the basis that HMRC would look at the period of employment as a whole and provided the intention had been to attend a series of temporary workplaces, and this had been demonstrated throughout the employment, HMRC would not regard the final workplace as permanent.
However if the employee has only been engaged on one assignment during his/her period of employment with us then the HMRC criteria would not have been met and expenses should not be allowed during the notice period.
The second topic covered is that of Claiming of Telephone Expenses through an Umbrella Company.
Home telephone (Main Line) / Personal Mobile Telephone
Reimbursement of the cost of business calls made from a private home telephone or employee’s personal mobile telephone, where justified by reference to the itemised bills. The line rental remains the personal liability of the subscriber.
So, it follows, that if faced with a claim for telephone calls the umbrella company must call for and see the relevant itemised bill.
To be admissible an employee has to have incurred the expense “wholly, exclusively and necessarily in the performance of the duties of the employment” and HMRC’s view will be that the purchase of a mobile ‘phone is not “in the performance of the duties” so the cost would not be allowable.
HMRC accept that some employees use their own mobile phone to make business calls. In such cases a deduction can be permitted for the actual cost, necessarily incurred, of telephone calls made by the employee in the performance of the duties of the employment.
Mobile phone tariffs can be complex and it is not always easy to determine the actual cost of a business call. Some tariffs include a certain amount of free time in the rental charge. In these cases there may be no cost to be deducted. As an example if the tariff for the mobile phone includes up to 10 minutes of free calls each month and in one month the employee pays £22, which is the rental charge only, then because the employee’s total calls, all of which were business calls, amounted to 8 minutes no deduction can be permitted because no expense has been incurred in making the business calls.
The following month the employee pays £28, which is £22 for rental and £6 for calls. Calls that are charged are paid for at a rate of 20p per minute. In the month the employee made calls totalling 40 minutes, of which 30 minutes were for business and 10 minutes were private. A deduction should be permitted for the cost of business calls, and the amount that can be deducted is £4.50, which is 75% of the call charges, because 75% of the total call time was made up of business calls.
Claiming for Incidental Overnight Expenses through an umbrella company.
Advice from HMRC on the issue of Incidental Overnight Expenses which was previously known as Personal Incidental Expenses or PIEs.
Firstly the £5 and £10 (overseas) figures are not flat rate allowances they are the maximum amounts that can be allowed to an employee staying away from home on a business trip. Although employees are not required to produce receipts they are required to make a claim showing that expenditure had been incurred and the amounts.
As the employer, the umbrella company has to be satisfied that:
- the employee was away from home on business for each night involved;
- amounts claimed do not exceed the maximum in each case;
claims have not been made twice, for example check that the employees have not charged the incidental overnight expenses to their hotel bill and still claim the IOE.