Basic question about expenses - Pretty much yes or no question almost

chrisbur

ultimatefighter wrote: »

Ok. Now I think it's all clear to me now.

It's so simple.

If I have spent 94 and my company will cover expenses.
If the first thing they do is deduct from my basic pay the expenses, I'm not being given them at all.

If they didn't put that £94 back after deductions I would be £188 down.

Am I right or am I wrong?

Yes that is how I see it, but you are not down £94 because your tax and NI are lower than they should be as a result of the £94 being deducted from the wrong figure. However it is possible that HMRC might claim this underpayment at some point then you would be down the full £94

ultimatefighter

Why would they claim it?

Or is this a case of taking my expenses to use against my tax and NI?

So what they aren't doing is covering expenses but using my expenses figures to simply reduce my taxable income? I'm quite knowledgeable and intelligent but without having someone to take me through this sitting beside me.... Who is a little honest, is even making me have to use my brain a little more actively.

Here is what the JSA pay group site says
"Income tax and National Insurance will not be applied to any legitimate business expenses you claim, for example, if your weekly income is £800 and you legitimately claim £200 expenses, £600 will be taxable and £200 will be paid without applying Tax or National Insurance."

So this is worded all wrong... Technically you aren't claiming any of your expenses but just telling HMRC that you shouldn't be deducted for Tax and NI from that amount of £200 meaning that if I spend £200, I get only £62 of it back because I'm not charged on it (20% tax and 11% NI assuming I'm taxed on the whole lot).... Am I correct?

ultimatefighter

Eg here is a take home pay calculator.
https://jsagroup.co.uk/take-home-pay-calculator/

If it's 5 days at 135 each with no expenses it's £456
With £150 weekly expense it's £516
Claiming the full thing at £230 expenses gives a net pay of £550 so I spend 230 and get £100 back only?

So technically you aren't CLAIMING expenses but only the offset tax?

chrisbur

ultimatefighter wrote: »

Eg here is a take home pay calculator.
https://jsagroup.co.uk/take-home-pay-calculator/

If it's 5 days at 135 each with no expenses it's £456
With £150 weekly expense it's £516
Claiming the full thing at £230 expenses gives a net pay of £550 so I spend 230 and get £100 back only?

So technically you aren't CLAIMING expenses but only the offset tax?

Have had a look at this calculator and I believe that you are entering the figures wrongly. You need to put the full daily payment (ie inclusive of any bonus) into the Assignment rate box and then the part of it that is expenses into the expenses box.

So if you put 135 with no expenses you get 456.45
If you then add in expenses of 150 this increases your daily rate by 30 which then becomes 165.
So if you put in 165 with 150 expenses you get 606.45
Exactly £150 more so you are getting your full expenses with no tax or NI deducted.

Unfortunately this calculator does not show its workings so we do not know if there is any pension or holiday accrual in it or what exactly is considered an allowable expense.

ultimatefighter

But the points, Chris, is that you aren't really getting your expenses back now are you? You simply get taxed less by spending more money on things related to your job?

chrisbur

ultimatefighter wrote: »

But the points, Chris, is that you aren't really getting your expenses back now are you? You simply get taxed less by spending more money on things related to your job?

Think I will have to give up on this one, the tax calculator shows that if your income goes up £150 which is expenses you get £150 more, is that not getting your expenses back?

agrinnall

Given that this is the 18th post in the thread your hope that it would be a yes or no answer seems a bit optimistic. If chrisbur has had to give up then I can't add to the explanations, so I would suggest that your best course of action would be to ask the umbrella company to give you a full explanation of how they process the payment, and keep asking until you understand it.

ultimatefighter

agrinnall wrote: »

Given that this is the 18th post in the thread your hope that it would be a yes or no answer seems a bit optimistic. If chrisbur has had to give up then I can't add to the explanations, so I would suggest that your best course of action would be to ask the umbrella company to give you a full explanation of how they process the payment, and keep asking until you understand it.

Chris just mentioned that if your income goes up by £150 then you make £150 more but the umbrella company doesn't do what I'm suggesting should be the case. It seems like these expenses aren't actually paid to you but you just get taxed less if you spend on work related things to lower your NI and tax bill.
Am I right in thinking this or am I wrong?

ultimatefighter

I can now see what Chris did on the calculator. He spread expenses of 150 per week onto the salary which can't be done. I can't just increase my daily rate because I choose to.

chrisbur

ultimatefighter wrote: »

I can now see what Chris did on the calculator. He spread expenses of 150 per week onto the salary which can't be done. I can't just increase my daily rate because I choose to.

Definitely the last go.

We are taking two hypothetical cases, one who gets a daily wage of 135 for 5 days = total income £675 and the second a daily wage of 135 for 5 days plus £150 a week for expenses = total income £825
In other words case 2 gets £150 a week more than case 1 and this is all due to expenses.
We put these figures into the calculator that you chose. I had to spread the expenses over the five days as it would not take a weekly figure.
Case 1 has £675 a week no expenses and gets a predicted take home pay of £456.45
Case 2 has £675 plus £150 expenses so total pay is £825 of which £150 is expenses and gets a predicted take home pay of £606.45.
Case 2 has an increase in starting pay of £150 compared to case 1 and all of this £150 is expenses.
Case 2 gets to take home according to the calculator an extra £150
If all that has been added to case 2 is the extra £150 which is all expenses and case 2 now has an extra £150 to take home then case two has received in full their £150 expenses.
QED

You say " I can't just increase my daily rate because I choose to."
My point is that according to this calculator expenses are paid in full. These were hypothetical cases to show that expenses are paid in full.
When you used the calculator I think that you used the examples of case 1 £675 no expenses and case 2 still £675 but now £150 of that £675 is expenses. This does not show the result of expenses it shows the result of changing some of the earnings from earnings to expenses. In other words you are comparing £675 earnings case 1 with £525 plus expenses £150 case 2. This will obviously show only the tax difference not the value to you of the expenses.

Your problem stems from the fact that the figure used to start the calculation of your wages did not include your expenses but they were used to adjust tax and NI so you got the tax/NI benefit but not the expenses. In fact as a result of it being done this way I believe you have been under-taxed and under-paid NI. The calculation of your wage began with £675 it should have started with £769.10 if the £94.10 was going to be deducted.

I will also repeat something I said earlier
"It looks to me as if the people you work for are paying to the Umbrella company £675 for work done and £94.10 for expenses. If this is the arrangement and not something like £675 which includes £94.10 for expenses then most of their calculations are wrong."
Have you checked this?