One of the major benefits of using an Umbrella Company is the ability to claim Contract related expenses. The HMRC dictates that all expenses claimed must be ‘wholly and exclusively incurred in the performance of the duties of the employment’. Expenses help to increase your take home pay by reducing the amount of tax that you pay. In its simplest form, if you are paid £200 a day and you work 5 days, your invoice total is £1000. If you claim £200 in expenses, you are taxed on (£1000-£200) £800 rather than £1000.

Expenses that are most commonly claimed are travel (from your home to your contract location) and subsistence (food purchased while away from your home). Other expenses may be able to be claimed, but you should get in touch to find out.

We have compiled a list of the questions we get asked most frequently on expenses. If there are any questions that we have not answered, or you need further information, please get in touch;

Do I need to send in Receipts?

Yes! The HMRC dictate that all expenses claimed must be ‘wholly and exclusively incurred in the performance of the duties of the employment’. A receipt is the best way to prove to the HMRC that a purchase has been made.

If VAT has been applied to the purchase, please send in a VAT receipt as well.

You are liable for any underpayment in tax for a period of six years after an expense has been claimed. When you send in receipts to Redego, we will scan them onto our online portal, and keep the receipts for the full six years. If during this time you are investigated by the HMRC, we will provide all the necessary receipts to prove that all of your expense claims were legitimate and ‘wholly and exclusively incurred in the performance of the duties of the employment’.

Do I need to send in receipts before I can get the benefit of the claim?

For small individual claims, Redego will apply the tax relief to your next payment. For larger claims, a receipt must be provided before you can receive the tax benefit.

After you have made an expense claim via our online portal, you must send in receipts to our freepost address within 14 days. If Redego do not have receipts within this time period, the tax relief that you have received will be reversed, and the tax will be clawed back until we receive the receipts.

How do I send in receipts?

When you add an expenses to our online portal, you will be given a code which relates to each expense. Simply write the code on the corresponding receipt, put all your receipts into an envelope, write your name on the back, and send it to our freepost address! It could not be easier!

What happens if I do not send in receipts?

It is you and not Redego who are liable for any underpayment in tax. If you do not send in receipts, or do not send them in within the allotted time frame (14 days from entry onto our online portal), the tax will be clawed back from your next payment. If you leave Redego and still owe tax, you may be reported to the HMRC, who may change your tax code as a result.

Why do some Umbrella Companies not require receipts?

Receipts are required as proof of purchase, however, it is the responsibility of the contractor and not the Umbrella Company to ensure that all expense claims are legitimate, and all receipts are accounted for. As a result, some Umbrella Companies do not insist that receipts are sent in. Our strict policy on expenses means that we can prove to the HMRC that are expenses are genuine.

Also, some Umbrella Companies choose to have a Dispensation, which reduces the amount of paperwork that the Umbrella Company have to do, but can result in them allowing contractors to claim expenses which they are not legitimately allowed to.

Click here for more information on Dispensations.

Can I claim for Guest Houses, Hotels and B&B’s?

If you are required to stay away from your home address as part of your contract, or if it is not practical for you to commute from your home address to your contract location, you will be able to claim the cost of your accommodation. In all cases receipts need to be provided, and you are also allowed to claim £5 overnight incidental allowance (when adding hotel claims to our online portal, the overnight incidental allowance is added automatically).

How can I claim for rented accommodation?

Redego deal with claims for rented accommodation on a case by case basis. The HMRC insist that all claims are ‘wholly and exclusively incurred in the performance of the duties of the employment’. Evidence needs to be provided that proves you are only using rented accommodation because of your current contract.

Rent can only be claimed if you a renting a property away from your home address. Please contact one of our team if you have any questions on rented accommodation, or any other aspect of umbrella companies.

Can I claim for personal incidentals, such as a newspaper?

If you stay away from your registered home address for the night, you are entitled to claim £5 personal incidental allowance. You do not have to provide receipts for the incidental allowance. It is intended to cover items such as newspapers and other incidental expenses incurred while staying away from home.

If I stay at a friend’s house, can I claim any expenses?

In the past the HMRC did allow £25 to be claimed each night that you stayed with ‘friends or family’. However, with effect from 6th April 2009, the friends and family concession has been rescinded.

Currently, the only expense you are able to claim if you are staying with Friends or Family is £5 overnight incidental allowance.

What fuel costs can I claim?

When making a mileage claim, you do not claim for the cost of the fuel that you have put into your vehicle. You claim a rate per mile that you drive. The amount that you can claim per mile does not just cover the cost of fuel for your vehicle, but also for wear and tear on the vehicle.

Currently the HMRC allows claims of 40p per mile for the first 10,000 miles (per year), and 25p per mile thereafter. The HMRC also allows you to make an expense claim of 20p per mile if you cycle to and from your place of work.

Do you need fuel receipts for every claim I make?

That depends on the amount of mileage that you have claimed. We make an estimate of how many miles are covered on each receipt you send in. Our estimate is based on the AA’s MPG (Miles Per Gallon) rating for your car.

For example, if the AA’s MPG rating says that your car does 40mpg, you will need to provide evidence that you have put at least one gallon of fuel in for every 40 miles that you claim.

Please get in touch if you need any further information on travel claims

Do you need a VAT receipt?

Yes. A VAT receipt contains much more information about the claim, which helps prove to the HMRC that your claim is legitimate

What if I don’t agree with the number of miles you have allocated to my fuel receipt?

The number of miles that we allocated is based on the AA’s MPG rating for your vehicle. If you believe that the number of miles allocated is different from what your vehicle achieves, please get in touch with us and we will investigate the matter.

Can I claim mileage for rented vehicles?

Because the 40p per mile tax relief that the HMRC allows covers wear and tear on the vehicle, if you are using a hire car, or a rented vehicle, you are only allowed to claim the value of the fuel that you have put into the vehicle.

In some cases you are also able to claim the cost of hiring the vehicle.