I am completing the year end accounts for an IT Contractor who undertakes short term contracts in Europe and around the UK.
Each contract lasts betweeen 1 and 6 months and when in Europe he spends one month away at a time and in the week returns only at weekends.
In the clients records he has claimed £ 300 Per week for Accomodation, food and living expenses. He has also separately claimed his business mileage at 40,45 and 25p per mile per HMRC guidelines.
It does not seem right to simply claim £ 300 per week but I am not 100% sure on the rules on these types of expenses. When he works in Europe he claims £ 25 per day (£ 800 per Month) plus all travelling expenses, as he says this is what the other contractors do.
I'm sure that there must be a strict view / legislation on this per HMRC and would be grateful for some help.
Unfortunately IT contractors are the same as many trades and they talk to each other in the pub and often get very bad and often dangerously incorrect advice.
There are various schemes that they use such as umbrella companies where a daily payment along employee lines is allowable but the fact that you are doing this persons books would suggest to me that they use the traditional limited company model and as such the daily allowance is not open to them although they may be working with people in the same office who use this method and it is allowable.
Maybe a few more details from the contractor are needed to ensure that there isn't some agreed scheme that he is part of.
Also worth checking the contract to determine whether this £25 is actually a pedium payment on top of the contract rate paid by the agency specifically for living expenses. I've seen that one before and my take on that is that it's a taxable additional payment rather than an allowance although interested to hear other peoples views on that.
Hope that this helps for starters, (excellent question by the way)
kind regards,
Shaun.
P.S. we crossed in the post Jenny. Some excellent links there. Thats me set up for some fun reading for the next hour or so!
-- Edited by Shamus on Monday 22nd of August 2011 11:32:57 AM
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Does you contractor have a written dispensation from HMRC detailing what has been agreed? I do this with as many as mine as I can and it certainly makes life easier.
Thats exactly what I meant Shiela. Thanks for the correction.
On the more usually used in the USA front though I've actually come across it a lot in Europe. Even had it myself for a three month stint in Slovenia although that was a few years ago now (excellent alchol fueled woman chasing times in real first (best) series of "Auf Wiedersein Pet" type of mode).
My dyslexic spelling must drive you absolutely scatty. Sorry Sheila.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thanks for all of your replies, I am just reading through the HMRC Manual - fun...
I think that the dispensation route could be a much easier method for this type of client as then its simply a matter of multiplying an amount by the no. of days away and i'll know that HMRC have pre-agreed to the clients expense claim.
I agree with the other comments about other contractors and mates down the pub, it seems that their opinions mean more than HMRC's opinion, until they are investigated, I guess.
