P11D and Umbrella Company Contractors

(4 minutes to read)

For the many people making the transition from limited company to umbrella company contractor, they will come across quite a few differences, one of which is how expenses work – more specifically, P11D.

What is a P11D?

P11D is a form sent to HMRC covering certain expenses and benefits provided for employees and directors for the full financial year from the 6th to the 5th of April.

The information filed for this form is to notify HMRC of any tax or National Insurance Contributions that a company may need to pay on expenses and benefits in kind – this might include:

  • Private healthcare
  • Health insurance
  • A company car

However, as a contractor working through an umbrella company, a P11D won’t apply to your way of working.

What about dispensations?

You may have heard of dispensations in relation to umbrella company contractors; this was a method used instead of having to fill out a P11D or P9D form.

It was an easier way for umbrella companies to report expenses, saving time on having to record every single expense accrued by all of their contractors.

However, as of 6th April 2016, dispensations were revoked under the Finance Act 2016 – prior to this, umbrella company contractors were able to claim for a variety of expenses in order to reduce their tax bill, such as:

  • Travel
  • Daily meals
  • Accommodation
  • Clothing
  • Training
  • Equipment

The reason for these changes came about because ultimately an umbrella company contractor is employed by an umbrella company – the same restrictions would apply to a contractor that was deemed to be working inside IR35. For more information on the ins and outs of IR35, you can read our IR35 and Umbrella Company Contractors page.

So, can an umbrella company contractor claim any expenses?

As an umbrella company contractor is employed by their umbrella company, the best way to look at the situation is would a permanent employee be able to make any expense claims?

In general, no, but there may be certain situations where this could be considered. For example, when it comes to travelling away from a usual place of work a company might offer their workers mileage/travel costs, as well as a contribution towards their meals while they’ve been away.

If you’d like to read more on this, you can take a look at our Umbrella Company Expenses: A Guide page.

This might be off-putting for those looking to become an umbrella company contractor – claiming back on expenses is an advantage often highlighted when joining the self-employed sector.

However, it’s important to remember that there are still so many benefits that come with being an umbrella company contractor. Firstly, there’s no need to deal with the hassle of completing a yearly self-assessment tax return, there’s more flexibility compared to a permanent worker, giving you the opportunity to create a better work life balance; and there’s also the fact that contractors tend to earn a higher daily/weekly/monthly rate compared to salaried employees.

For more information on the benefits of working through an umbrella company read our Benefits of Using an Umbrella page.

We hope that you have found this page helpful and it has answered some of your questions about P11D. If you’d like to sign up or need any further information, please call one our friendly experts on 01206 591 000.

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