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IT contractor expenses - most contractors are confused!
Posted Oct 29, 2007
The results of an online poll conducted by our colleagues at Contractor UK shows than most IT contractors are still confused about claiming business expenses.
The poll was launched following a large number of expense-related questions being asked on a contractor bulletin board. A series of questions was developed by Contractor Umbrella to test the level of understanding amongst contractors.
Lisa Keeble, MD of the umbrella company, said:
"...good quality and ethical information about expenses is often hard to come by, this survey reveals just how tough it can be for contractors."
The key findings from the online poll were:
1. Nearly 99% of contractors thought claims for daily subsistence were possible without the need to keep any receipts
Contractors should always keep receipts, after all how would they prove to HMRC that they actually made the purchase in the first place.
2. 20% of contractors believed it was the Umbrella Company and its dispensation policy that dictated the expenses that they could claim.
No it is HMRC
3. 98% of contractors believe that you can claim breakfast, lunch and dinner on a daily basis.
Again this is not true, in fact used in conjunction with the first point about not keeping receipts could land the contractor with a very large tax bill and possible penalties for tax avoidance.
4. 40% of contractors think that by using an Umbrella Company they can increase their net pay by 40% or more.
ALL umbrella companies must follow the same HMRC rules.
It is worth remembering that IT Contractors cannot claim for something they didn't actually pay for in the first place, or can't provide evidence that they did.
They will be personally liable for any underpaid taxes NOT the company they're working through or taking advice from.
Contractors would be wise therefore, to steer clear of companies and scheme providers promoting generous expense allowances with 'NO' receipts required.
Try Contract Eye's guide to IT Contractor Expenses for more information.
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