HMRC Do Not Give Money Away - Umbrella Company Contractors Beware!
In fact they are known for quite the reverse so why do some umbrella companies advise their employees that they can claim a daily amount for subsistence without the need for receipts or, in some cases, expenditure.
Well, it's all down to something called 'scale rates'.
In 2009 HMR&C introduced 'benchmark' scale rates.
These are fixed amounts that employees can claim for meals when working earlier or later than their usual working hours, before 6 a.
m.
and later than 8 p.
m.
, or when they have been away from home for more than 5 hours (£5 - one meal) or 10 hours (£10 -2 meals).
So, does this mean that, if you are an employee of an umbrella company that allows scale rate subsistence expenses, that you can claim £50 a week for meals if you are away from home for 10 hours each day? No, it doesn't.
If you haven't incurred the cost and you don't meet the criteria, you can't claim the expense - it's as simple as that.
So, how will your umbrella company check that you have entitlement to the expense? In order to be able to pay scale rate expenses, the umbrella company must have applied for and secured a Dispensation from HMR&C but this does not mean that the expenses can be paid out to each employee without verifying that the claim is legitimate.
HMR&C guidance states that: "An employer will need to keep sufficient records to be able to demonstrate that the employee was entitled to the payment.
An employer also needs to be able to demonstrate that routine checks are undertaken to ensure that the travel expenses rules are being followed".
This record keeping will involve the employee completing a 'timesheet' detailing their journey and producing receipts to support the expenditure which will then need to be regularly reviewed by the umbrella company.
http://www.
hmrc.
gov.
uk/manuals/eimanual/eim30059.
htm.
If HMR&C are not happy that these requirements are being complied with they can revoke the umbrella company's dispensation and scale rate payments will no longer be permitted.
This may explain why, in 2012, 2163 dispensations were reviewed by HMR&C and 1861 were refused or revoked - 86%! So then, what does all this mean? Basically, if your umbrella company has been allowing you to claim an amount each day for subsistence and you haven't spent anything on meals or you can't produce receipts then you are likely to receive a visit from the taxman sometime in the future and you will be expected to pay back the tax relief that you will have received.
Well, it's all down to something called 'scale rates'.
In 2009 HMR&C introduced 'benchmark' scale rates.
These are fixed amounts that employees can claim for meals when working earlier or later than their usual working hours, before 6 a.
m.
and later than 8 p.
m.
, or when they have been away from home for more than 5 hours (£5 - one meal) or 10 hours (£10 -2 meals).
So, does this mean that, if you are an employee of an umbrella company that allows scale rate subsistence expenses, that you can claim £50 a week for meals if you are away from home for 10 hours each day? No, it doesn't.
If you haven't incurred the cost and you don't meet the criteria, you can't claim the expense - it's as simple as that.
So, how will your umbrella company check that you have entitlement to the expense? In order to be able to pay scale rate expenses, the umbrella company must have applied for and secured a Dispensation from HMR&C but this does not mean that the expenses can be paid out to each employee without verifying that the claim is legitimate.
HMR&C guidance states that: "An employer will need to keep sufficient records to be able to demonstrate that the employee was entitled to the payment.
An employer also needs to be able to demonstrate that routine checks are undertaken to ensure that the travel expenses rules are being followed".
This record keeping will involve the employee completing a 'timesheet' detailing their journey and producing receipts to support the expenditure which will then need to be regularly reviewed by the umbrella company.
http://www.
hmrc.
gov.
uk/manuals/eimanual/eim30059.
htm.
If HMR&C are not happy that these requirements are being complied with they can revoke the umbrella company's dispensation and scale rate payments will no longer be permitted.
This may explain why, in 2012, 2163 dispensations were reviewed by HMR&C and 1861 were refused or revoked - 86%! So then, what does all this mean? Basically, if your umbrella company has been allowing you to claim an amount each day for subsistence and you haven't spent anything on meals or you can't produce receipts then you are likely to receive a visit from the taxman sometime in the future and you will be expected to pay back the tax relief that you will have received.
Source...