It’s not as simple as making an onward payment to you as we have the tax liability with HMRC to evidence why a person has been paid expenses with no tax deducted. We must be able to evidence that we have fulfilled our obligation as your employer to carry out checks to ensure that the expenses were legitimate, and we have evidence on file should we ever be asked to provide this. All responsibility to HMRC lies with UC Contractors, and we must make sure that we are doing things right for tax purposes. However, as to how the funds are processed will depend on whether the expenses can be verified by an expense claim form and receipts submitted by the contractor. Below is a detailed explanation of what we must do for every time an agency reimburses expenses:
In order for expenses to be processed through the umbrella company, we would need to assess whether the contractor falls under SDC or not. At UC Contractors, we make the assumption that all workers are under SDC in the manner in which they provide their services. If they feel that they do not fall under this category and have legitimate expenses to claim, we recommend that they claim these through self-assessment at the end of the tax year. In short, when asked, we only process expenses reimbursed by the agency and these must be verified and supported with a claim form and receipts.
If one has not been submitted, we will email requesting that you complete an Expense Claim form with as much detail regarding your expenses as possible. We will then check your agency contract/assignment schedule/email detailing the role and the location of the assignment. If the location is specified and this is the same place for which travel expenses are being claimed, this would classify as a ‘permanent place of work’. In this instance, any funds received as ‘travel expenses’ will not be approved as allowable and must be processed with full PAYE deductions as this is NOT a temporary place of work.
If the agency contract/assignment schedule/ email confirming the role has a different location specified to that on the expense claim form or no permanent location is given (in the case of some workers who do multiple site visits or work from various locations), the location mentioned on the expenses claim form could be classified as a ‘temporary place of work’ although this would still need to be checked if frequent claims are made.
On the expense claim form we would ask that you provide postcodes to assist us in calculating mileage along with a brief explanation of your reason for travel.
If we receive a remittance from an agency that just states ‘Expenses’ and a sum with no details, we must send an email to the agency requesting further information and this must then be cross checked with the expense claim form and receipts received by the contractor. If the agency doesn’t respond yet the contractor has completed relevant expense claim form and submitted associated receipts, these must be checked before processing.
If we receive a remittance from an agency with expenses detailed, we will raise these on your online system using the same process for raising a timesheet but selecting EXPENSE as the category context.
The rule of thumb when checking expense claims is ‘Are the expenses wholly, necessarily and exclusively for business and relating to a temporary place of work?’ Section 339(3) ITEPA 2003 states: A workplace is a temporary workplace if an employee goes there only to perform a task of limited duration or for a temporary purpose. So even where an employee attends a workplace regularly, it will be a temporary workplace and so not a permanent workplace if the employee attends for the purpose of performing a task of limited duration or other temporary purpose.)
Mileage: If mileage is being reimbursed, we will check what journey is being claimed/paid for. Check the below:
If there is anything that is not allowed or verified by the agency, we will send an email to you explaining our calculations and the remaining amount will be raised as a timesheet for internal purposes. Eg. if the agency sends £100 but the total receipts/costs detailed total £80, then £80 can be processed as EXPENSES (approved allowable expenses reimbursed by the agency) and can be repaid to the contractor in full without the deductions. The remaining £20 must be processed as a TIMESHEET and processed with PAYE tax and NIC deductions.
If the agency has an issue with these calculations (some offer set amounts per day for contractors as a way of increasing their day rate), we will ask them why they think certain expenses are allowable. For example if a person lives 5 miles from the office, we may ask why would they be allowed to claim £35/day food expenses? Also, if hospitality has not been organised as a business meeting, for example, food for another person cannot be claimed.
If you have claimed expenses from your agency and are unsure what to put on the form or have received a payment and don’t understand our calculations, please reach out to us! We’ll be happy to talk you through it.