Umbrella Company Expenses

As a Contractor working through an Umbrella Company, you have the ability to minimise the tax that you pay by claiming legitimate business expenses. These expenses must be incurred Wholly, Exclusively and Necessarily in the course of providing your services.

There are two types of expenses in relation to your work through an Umbrella Company;

Billable expenses - these are expenses that you have incurred whilst performing your duties and your Client has agreed to reimburse them to you i.e. the cost of a business trip. In this instance the Umbrella Company will invoice your Client for the expenses due and reimburse them to you once received from the Client.

Non-Billable Expenses - these are expenses that the Client has not agreed to reimburse you for, however because they are genuine business expenses your Umbrella Company is able offset these expenses against your contract income, and reimburse them to you, giving you the benefit of tax relief on the value of these expenses.

Typical Business Expenses - there are a number of expenses that you can claim for through your Umbrella Company, some being general business related expenses, and others being specifically related to working at a temporary workplace.

General business related expenses would typically include:

Computer equipment (if specifically needed on your contract)
Contributions to an executive pension
Business telephony costs (mobile, phone, broadband)
Professional subscriptions
Accommodation expenses while away from home (must be reasonable)
Eye tests
Training courses (if directly related to your work)
Meal allowance (only if you’re away from your normal place of work)

Temporary workplace related claims would typically include:

Travel expenses (mileage allowance, parking fees)
Subsistence allowances

A temporary workplace is a location where you work for a limited duration of not more than 24 months, or you spend less that 40% of you time at that location.

To be able to claim temporary workplace related expenses i.e. the cost of any travel to and from the temporary workplace and the reasonable cost of any food and beverages whilst at the temporary workplace, you must be able to demonstrate that your permanent place of work is your home and that you intend to work on multiple assignments at different temporary locations through your Umbrella Company. Your Umbrella Company will employ you on an ‘overarching’ contract of employment which will indicate that you are a permanent employee of the Umbrella Company, employed to undertake multiple assignments.

The Umbrella Company is able to reimburse these expenses to you from your contract income, because it will typically pay you a low fixed hourly rate, typically the National Minimum wage, with a variable element of pay. This variable element is taxable but can be reduced by the level of expenses, which can be reimbursed tax free, thereby reducing the overall taxable income that you receive and increasing your take home pay.

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