Contracting under an umbrella - expenses

Contracting under an umbrella - expenses

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Discussion

amir_j

Original Poster:

3,579 posts

207 months

Tuesday 29th December 2009
quotequote all
Did a stint abroad via a foreign agency who paid me as an umbrella, ie salary slip had overall gross amount, then employer tax deductions, then employee tax deductions and then net.

Under double taxation rules I need to work out if I have to pay any shortfall in tax not paid over there so can I deduct the same expenses I would be able to if I was a UK contractor under a UK umbrella?

Also should I be using an average currency rate over the period or breakdown month by month. (Used UK account whilst overthere so only transferred money later on).

Eric Mc

122,685 posts

271 months

Tuesday 29th December 2009
quotequote all
If you are seeking to claim "employee" type expenses against UK tax, the expense claim must comply with the UK rules on allowable expenses for employees. In other words, the expenses must have been incurred "wholly, exclusively and NECESSARILLY in the course of your employment".

That means, any expense incurred by you during your employment where you weren't OBLIGED by your employer to incurr it CANNOT be offset for UK tax purposes.

It is quite a stringent test.

amir_j

Original Poster:

3,579 posts

207 months

Tuesday 29th December 2009
quotequote all
Hi Eric,

Many Thanks- is there no way I can count the agency as a bonafide umbrella? just like a UK umbrella company

Because I was contracting, and deductions for employers side were paid by myself can I not count it the same as a UK contractor working via a UK umbrella who is able to legitimately deduct travel/milage etc, after all it was a temporary place of work and I would not have been travelling or living abroad if not contracting?

Eric Mc

122,685 posts

271 months

Tuesday 29th December 2009
quotequote all
amir_j said:
Hi Eric,

Many Thanks- is there no way I can count the agency as a bonafide umbrella? just like a UK umbrella company

Because I was contracting, and deductions for employers side were paid by myself can I not count it the same as a UK contractor working via a UK umbrella who is able to legitimately deduct travel/milage etc, after all it was a temporary place of work and I would not have been travelling or living abroad if not contracting?
Were you taxed as an employee i.e. under the PAYE system (or the foreign country's equivalent)?

Edited by Eric Mc on Tuesday 29th December 12:31

amir_j

Original Poster:

3,579 posts

207 months

Tuesday 29th December 2009
quotequote all
Yes, set out as:

Contractd daily rate * days
- Minus Employers social security
= base salary
- minus employees social security
- minus income tax
=Net Pay

Eric Mc

122,685 posts

271 months

Tuesday 29th December 2009
quotequote all
As an "employee" then, I would expect that the "expenses" you can legitimately claim for will fall under those restricted "employee expense claim" rules I mentioned earlier.

amir_j

Original Poster:

3,579 posts

207 months

Tuesday 29th December 2009
quotequote all
Many Thanks Eric,I need to pay up then.

Out of curiosity though how do UK umbrellas such as http://www.contractorumbrella.com get away with allowing expenses to contractors?

Eric Mc

122,685 posts

271 months

Tuesday 29th December 2009
quotequote all
Beacuse they seem to have a fairly lax atitude to the rules. I think "getting away with it" is an apt description of what many of them do.

If your contract was on a self-employed basis, then the rules for claiming expenses would be more generous - but getting self employed status for what are, in effect, agency staff, is not easy.