Umbrella Company Contracting: When Should I Claim Expenses?

As a contractor working through our Umbrella Company, you may well be able to offset job related expenses against your taxable income to increase what you receive in your pocket when your payments are processed. It can be difficult to determine whether you are eligible to claim such expenses, so here are a few simple suggestions to help you decide:

Is my workplace temporary?

You can claim the cost of travel to and from a temporary place of work, along with any subsistence costs related to your attendance at a temporary workplace. HM Revenue and Customs offer guidance on what will be deemed as a temporary workplace in booklet 490 – Employee Travel.

As a broad guide, a workplace will be considered temporary if it is attended for a period of less than 24 months. However, it is important to note that if you attend the same workplace for the entirety of an employment, regardless of the length of time you attend the workplace, it will be deemed as permanent. If a workplace is deemed as permanent, you cannot claim travel and subsistence costs.

For example, if you fulfil a 6 month contract as an employee of our umbrella company and then leave say, to take on a permanent role elsewhere, the workplace attended for the 6 month period will be deemed as permanent and you should not claim costs relating to travel and subsistence. This is because you will have attended the same workplace for the entirety of your employment with our umbrella company.

If you fulfil a 6 month contract and then gain a further contract at a different workplace, remaining an employee of our umbrella company, then both workplaces should be deemed as temporary providing that neither workplace is attended for a period in excess of 24 months. In this example you are able to claim your travel and subsistence related costs.

Are my expenses incurred wholly, exclusively and necessarily in the performance of my contractual duties?

Another fundamental rule that must be adhered to when claiming for job related expenses is that any cost incurred should be incurred wholly, exclusively and necessarily in the performance of your contractual duties. For example, if you claim for business telephone calls made from your private mobile telephone, you should not claim for any fixed costs such as a monthly line rental charge.

To help you decide whether a cost has been incurred as above, you should consider if the cost would still arise had you not had the employment. In the above example, a line rental charge for your mobile phone will still be incurred regardless of your employment duties. There is no ‘excess’ cost involved that relates wholly, exclusively and necessarily to your contractual duties in respect of the line rental charge, and for this reason it should not be claimed.

Our tax department can discuss any questions you have and help you to determine whether you are eligible to claim job related expenses. Booklet 490 also has various examples that can help you decide.

Liberty Bishop
Clayton House, 3 Vaughan Road, Harpenden, Hertfordshire AL5 4EF

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