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Expenses / Tax deductions

What are expenses and how to submit them?

Traditionally umbrella company employees enjoyed tax and NIC relief on their home to work travel expenses, due to the special type of employment contract they worked under.

It is crucial to understand that the rules on what travel expenses qualify for tax relief are quite strict. There is generally no tax relief available for the costs of ‘ordinary commuting’ (travel between an employee’s home and a permanent workplace).

While travel expenses between an employee’s home and permanent workplace will not be allowable, travel expenses between an employee’s home and temporary workplace may be.

A temporary workplace is somewhere you would attend irregularly or for a limited amount of time. You can read more about permanent and temporary workplaces in HMRC’s EIM manual .

If your travel qualifies for tax relief you should be able to claim a tax deduction for your travel expenses. If you use your own transport for such journeys there is the statutory system of tax-free approved mileage allowances for business journeys. Travel expenses can also include subsistence (food and drink).

What are the basic rules?

Since April 2016, the rules around relief for travel expenses from home to work if you work through an umbrella company have been really tightened up.

The April 2016 rules say that relief for home to work travel and subsistence expenses is restricted where a worker:

  • personally provides services to another person
  • is employed through an employment intermediary (such as an agency or umbrella company)
  • is under the supervision, direction or control (SDC) of any person in the supply chain (or the right thereof).

Travel expenses are only allowable for tax purposes if:

  • the journeys are made in the performance of the duties of your employment, such as drivers. However, in this instance you can only claim the mileage on the return journey from your home to the work depot, as well as food.
  • there is an expectation to be moved from a work site to another, by the same client, then you can also claim travel expenses and subsistence (food & drinks).

Even if the rules are met, you need to make sure you have paid enough tax to get tax relief. In 2021/22, you will pay tax on your earnings over £12,570 which is your personal allowance. Depending on your tax code, this amount can differ. For more information on allowances, please click here.

 

You can find out more about the travel rules and about how HMRC apply them to different scenarios in HMRC’s booklet 490.

If you think you are entitled to claim tax relief, please contact us so we can check that your claim is compliant with the rules and help you submit it and send our step-by-step instructions on how to claim expenses with Rocket Paye.

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