Tax Query - IT Contractor

StuieUK34

Hiya all,

Not sure how to word this, but will try my best..
I did 5 months of IT contract work, got paid via an Umbrella company...
Umbrella company received my weekly wage from agency, took off employers NI contributions first, then did:
Weekly wage @ £5.80 an hour
Holiday pay - changed all the time between £50 upto £80
Remaining would be commission, say for instance £460

However, as i had business expenses, which were 40p per mile at 110 miles per day average + subsistance @ £10 per day (food), this would amount to say £275 ish per week in business expenses which are non taxable.... So in theory, if i get £460 commission, then £275 is set aside, and the remaining amount £185 is taxable....

Thats how i understand it?
And for all my weekly payslips, thats how i have seen it, although the weekly amounts always changed ?!!

Anyway, last 3 playslips i had (end of contract), have no business expense, and therefore out of my weekly wage, total deductions have equalled 47% per week....
Up until the 5th september, my payslips showed business expenses to date, then looks like it got zeroed again?

I'm no accountant, but i made up a spreadsheet showing my payslip info going back to 1st August, and it looks like the umbrella company have forgot to process my business expense, therefore f**king up my wage and making me lose out.. As i'm not contracting anymore and they cant pay another wage, there saying theres nothing they can do and the business expense has already been offset against my wages....
If thats the case, then the last 5 week payslips show a total of £220.60 in business expenses, baring in my mind my average is £275 per week....
How do i pursue a claim against a useless company (Springboard Umbrella company, free service, and the above shows why!)
Cheers

jimmo

As you haven’t had any other replies I think you really need to be a lot more specific.
Believe it or not, people who claim to know a thing or two about taxes love to play with actual figures because they can tell us an awful lot more than your words do so far.
When I read your opening post the first thing that struck me was the amounts of travelling and subsistence expenses and your assumption that they are allowable for tax purposes.
At this stage you really shouldn’t be surprised that a former taxman’s gut reaction is that the expenses are probably not allowable where others may think differently.
The next thing is Holiday Pay. Are you saying that the umbrella company took £50 to £80 a week from your earnings? If so, was that before or after tax deductions?
Where has that money gone?
Do you expect the umbrella company to give that money back to you? If so, when?
When you say that for the final 3 weeks your deductions have been 47% that seems way too high.
I can’t help the feeling that your umbrella company has somehow seen the errors of its ways in paying your travelling and subsistence expenses tax free and have, effectively billed you for their mistakes.
That is my view and I could be right or I could be completely wrong
Give us a complete set of figures, amounts earned and amounts deducted and I feel we can sort this out.

donquine

jimmo wrote: »

At this stage you really shouldn’t be surprised that a former taxman’s gut reaction is that the expenses are probably not allowable where others may think differently.

My first thought on subsistence is Caillebotte v Quinn, i.e. not allowable.

Mileage - could be ok, but given that the OP thinks subsistence should be deductible, I would question whether he has included things like commuter travel in his calculations.

With you on the lack of figures, jimmo - having some would help make the OP's situation clearer!

StuieUK34

ok, in a nutshell
My umbrella company receives £850 from an agency
Umbrella company takes off say: £75 for Employers NI contributions (just to note, the umbrella company is a free service)
Am left with £775....
Umbrella company pays me a taxable minimum wage which equates to £217.50
This leaves £557.50
I dont understand how it works, but temps get holiday pay, dont understand the tax part for that, but lets say its £57.50
I pay Tax and NI as per normal, for instance, this comes in at £70 (at a guess)..
This leaves £430 in the hands of my umbrella company, who class this as commission (think of sales job with minimum wage, and comission paid on top), so naturally i get taxed on this which is fair enough
However, as i run as a business, and the umbrella is a 'vehicle' as such, then as a business, i can claim for tax purposes, mileage and food stuff...
I.e. 40p per mile, and £10 per day as long as am out of the house for 10 hours per day... thats the law
So out of my £430, £50 of that can be for food,
so that leaves £380 in the pot...
Now mileage, i travel 55 miles to work, and 55 miles back, which equals 550 miles per week.
This equals £220 in miles at 40p a mile
So this leaves £160 in the pot, IE: £160 which can be taxed at the normal tax rate, and the £270 in business expenses cannot be taxed...

Thats how i understand it ?

jimmo

I’m sorry but I fear you are well and truly out of your depth here.
Umbrella companies exist for a very good reason and the fact that you have used one means that for tax purposes you are treated as an employee of the umbrella company.
That is why the umbrella company has to pay Employer’s National Insurance.
As an employee of your umbrella company or agency you are subject to specific rules on travelling and subsistence expenses.
Take a look here
http://www.hmrc.gov.uk/manuals/eimanual/EIM32130.htm
And here
http://www.hmrc.gov.uk/manuals/eimanual/EIM32125.htm
You haven’t actually said so but the fact that you travelled 55 miles each way suggests that you worked for one client at one location and in line with the rules outlined in those 2 links you are not entitled to claim travelling or subsistence.