Mileage Claim Query

angel999 · 18 January 2011 at 4:05PM

I am a new contractor and have recently been travelling to work by car, I was told that that I could claim back 40p per mile.

24.4 x 2 @ 40p p/m = £19.52 per journey
32 return journeys = £624.64 (which is what I submitted with receipts)

I submitted my mileage claim from 01-Nov-2010 for 32 days (return journeys) and received only £90.70 in expenses (31.40 hours @ rate of £10) with a tax deduction of £57.80 from my Umbrella Company. They are stating that I will only receive the mileage claim as tax relief and if my contract ends for example next week I can only recieve a small proportion of what I have submitted

I'm new to all this but I was uner the impression that I would receive the £624.64 please correct me if i'm wrong.

Can anyone please help me understand how all this works, the more I read about it the more confused i'm getting because I'm unable to apply it to myself....and now I have a headache

joeblack066 · 18 January 2011 at 5:02PM

I presume that you have been set up as a limited company by the umbrella company ( I hate these things!)? Therefore you are entitled to tax relief at 40ppm, ie
32 days work @ 7.5 hrs a day x £10 per hour total gross £2400
Less allowable expenses 1,561 miles @£0.40 ppm = £624.64
Total taxable income £1775.36
Tax will either be @ BR or whatever your tax code allows. If this is your only job I would imagine that you would pay around £497 in tax and NI on this amount, so your net amount will be around £1903. Without the tax relief on your mileage your net amount would be £1728.
But this is an umbrella company, and they will have charged you fer their services no doubt! Main point is, it is tax relief you get on your mileage, not expenses paid back to you!

chrismac1 · 18 January 2011 at 5:36PM

It could be worse as well! How long is your contract and does it all take place at one location? if so, this could be deemed your permanent place of work, in which case your allowable expenses are zero as you are deemed - just like an employee - to be travelling from home to work. If you have been travelling around to various locations - which your post implies you have not - then things get more complex. Likewise if this was a short term contract and your next assignment is somewhere completely different. This can get very tricky and the HMRC manaul on travel and susbsitence runs to hundreds of pages, but these are the main points. Also I hope your agent has run through IR35 with you, if not post this fact and I'll PM you details.

Any contractor should keep a closer eye than usual on the Budget this year - 23 March - because the "Son of IR35" is supposed to be unveiled in it.

angel999 · 20 January 2011 at 9:45PM

Thanks for the info. I think I'm finally starting to get my head round it all.

IR35 - never heard of it. Can you please pm me the details, my agency are rubbish. Any help will be greatly appreciated.

At least I'm only paying my umbrella company £1 p/w