Self employed - tax on expenses

mabelwashington

I have recently taken up an offer of early retirement/voluntary redundancy and have now found some freelance work. The company I will be doing this for will pay me an hourly rate, and will reimburse the cost of my travel to their offices or anywhere else for meetings etc (I will be working from home) - this will be bus/tube fares rather than a mileage allowance. How will these travel costs be treated for tax purposes, can anyone tell me please? do I declare the reimbursement as income but claim the fares as a deductible expense? Sorry if this is obvious, I haven't been able to find an answer elsewhere. Thanks in advance.

HappyMJ

The reimbursement is not income and the expense hasn't cost you anything so nothing goes on your tax return. There's no need to record anything but it's good practice to keep a copy of the invoice/receipt/travel ticket (you would have sent the original to the employer so they can claim the expense against their income), the expense sheet you sent in and any bank statements showing the money coming in.

If the reimbursement falls short of the cost of the expense you can claim the shortfall as an expense which reduces your taxable income. That generally happens with mileage with some companies paying 25 pence for all mileage when you can claim 45 pence for the first 10,000. Some companies also deduct 10 to 15 miles from every claim as that is the mileage you would have done if you had a permanent workplace. You can claim all the miles when travelling to a temporary workplace. Your permanent workplace is your home.

mabelwashington

That's what I started off thinking, then worried I was wrong, thank you so much.

booksurr

HappyMJ wrote: »

The reimbursement is not income and the expense hasn't cost you anything so nothing goes on your tax return.

that is incorrect. For the self employed all receipts must be declared but can be offset by costs otherwise there is no record of the expenses incurred and their nature

mabelwashington

Oh no, so that was my alternative thought which could after all be right!
Thank you both.
Maybe I just need to make the phone call to HMRC helpline I was avoiding ...

It occurs to me that sometimes they will ask me to pay for something else that they will reimburse e.g. they require me to go to a seminar for which they will pay both the fees and my time. When I was an employee travel & subsistence were treated differently from other things we could get reimbursed from petty cash, sounds like my bit of freelancing will probably be a bit more onerous over these things.

HappyMJ

booksurr wrote: »

that is incorrect. For the self employed all receipts must be declared but can be offset by costs otherwise there is no record of the expenses incurred and their nature

When I have clients reimbursing expenses that I pay for on behalf of the client they required the invoices/receipts that I paid for to claim the VAT back so I no longer had the originals. It doesn't really matter either way as no profit would be made and no tax liability is due.

I keep separate records for disbursements and none of that goes on to the tax return.

VAT though is a different matter...OP didn't mention VAT.

mabelwashington

I will have to ask them whether they need any VAT invoices that I have paid, thanks for alerting me to that.
At my hourly rates and the small amounts of work I will be doing I will be in no danger of registering for VAT myself :-)