Claiming tax back in a job now inside IR35

ALEXJONES1989

Hi there, 

I am formerly a freelance advisor/engineer working in the nuclear industry - this year the client blanket banned the use of Ltd companies and I have been forced to go onto a zero hours PAYE contract on a flat rate of £31 an hour @ 7.5hrs per day. Unfortunately with Nuclear being very tightly regulated, the client wants a lot of control and input - it is hard to pass the CEST tool in the environment as the client essentially dictates my work to me and provides me with a lot of approved tools and software - although I do provide a lot

I'm from Aberdeen, and currently working a 10 and 4 rota on a project in South East England.

Since starting this job in late June, I've had a outlay of (figures made approximate)

£2500 on courses.
£1350 on flights back home (including airport parking)
£2100 in accommodation.
£600 in specialist tooling.
£600 in specialist software
£700 in food
and about 3300 miles of vehicle travel.

Previously these expenditures would be placed through the LTD company. Has anyone had any experience on how easy it is to claim this back from HMRC as PAYE?

After I have paid out for the training, tooling and software - my day to day receipts for expenses (travel, food, accommodation) are about £1200-£1400 a month (pending on flight prices).

Financially the job is proving to be pretty unviable, by the time everything is paid its about 50% of where it used to be - so being able to claim back a portion of this in tax relief would make life a lot easier. 

Dazed_and_C0nfused

It's dead easy.  You just include the details on your Self Assessment return.

What may prove more difficult is discussions with HMRC should they ever decide to investigate your return.  Which can be after they repay any overpaid tax (based on your return) and be several months later.

You might want to have a read of the HMRC Employment Income manual on gov.uk as this covers expenses and will highlight the potential challenges you could face.

Jeremy535897

For example https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim31650
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim31800
https://www.litrg.org.uk/tax-guides/employment/employment-benefits-and-expenses/what-travel-expenses-can-i-claim
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim32525

ALEXJONES1989

Jeremy535897 said:

For example https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim31650
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim31800
https://www.litrg.org.uk/tax-guides/employment/employment-benefits-and-expenses/what-travel-expenses-can-i-claim
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim32525

Looking at that I wouldn't be able to claim my training/course fees back as a taxable expense?

As a limited company these were expenses related to my company and ability to trade. However, as an employee these are just necessary expenses to remain in ticket and be employable.

Don't want to tread over the rights and wrongs of IR35, but I'm finding the experience and rate cuts hugely frustrating. 

prowla

Successive governments have been using IR5 as a means of stamping out small enterprise, with the current change simply making it not viable for some to trade; the current supply chain and petrol issues shows that they haven't though it through.

I suppose the next step will be a shortage in nuclear workers then?

Jeremy535897

ALEXJONES1989 said:

Jeremy535897 said:

For example https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim31650
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim31800
https://www.litrg.org.uk/tax-guides/employment/employment-benefits-and-expenses/what-travel-expenses-can-i-claim
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim32525

Looking at that I wouldn't be able to claim my training/course fees back as a taxable expense?

As a limited company these were expenses related to my company and ability to trade. However, as an employee these are just necessary expenses to remain in ticket and be employable.

Don't want to tread over the rights and wrongs of IR35, but I'm finding the experience and rate cuts hugely frustrating. 

The basic problem is that, under the old regime, your own company could have claimed tax relief on your courses, and you would have received less in salary. Now that you are treated as a direct employee, you cannot claim a deduction for much at all, as the law assumes that if the expense was necessary, the employer would pay it. That really is how it should be, and you might be able to negotiate a lower rate of pay but have the employer incur costs like training that they can claim tax relief on.

ALEXJONES1989

prowla said:

Successive governments have been using IR5 as a means of stamping out small enterprise, with the current change simply making it not viable for some to trade; the current supply chain and petrol issues shows that they haven't though it through.

I suppose the next step will be a shortage in nuclear workers then?

Not sure it will ever come as far as that, but there is an increasing industry wide recruitment problem - the agency I am with struggled to man this project, and we still have vacancies here despite it starting on the 6th of September. I do know a fair whack of people who have left the industry as a result of IR35 making the pay unviable. Nobody wants to work shifts and be away from home for months at a time - when they can now make similar money at home doing less responsible jobs. A long time colleague of mine - a 20yr experienced specialist in remote inspections of nuclear reactors - is now driving a van for Amazon, as it pays in the same ball park for doing the same hours but... he is home every night. The £31 an hour sounds like a great wage - but deduct the tax, accommodation costs, travel costs, course costs, equipment costs, etc - that quickly becomes a lot less!

When a power station has a maintenance shut down, the labour requirement for that power station increases by 600 people for the duration of the shut down - many of that workforce have industry specific skills but need to be flexible and happy to work all over the UK to keep in work. Likewise with smaller projects, you negotiate a contract for your services for however long required - but it might be 3mths of working long shifts of 13 days on, 1 off - then maybe nothing for 3mths. The lifestyle has never been particularly appealing, but you could earn well for doing the contracting circuit which is of course what made contracting appealing. I guess the thought of doing the same job for no extra benefits than when you were a ltd company, and a 30-40% reduction in take home pay is motivating anyone to stay. I will also be leaving the UK industry after this project.

I know with HGV's, my cousin used to be an owner/operator of a truck - he gave that up about 6-7 years ago as being a sole operator of a truck was proving more hassle than it was worth having been fairly lucrative 15-20yrs ago - but he continued on as an agency driver until IR35 made it the take home unappealing for him - he walked away in the spring and is now working as a forklift driver - again home every night, less hassle, and similar pay.

The issue isn't so much IR35, rather we needed to be outside of IR35 to be taking home the going rate - as that is how the agencies had negotiated the contracts. 

ALEXJONES1989

Jeremy535897 said:

ALEXJONES1989 said:

Jeremy535897 said:

For example https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim31650
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim31800
https://www.litrg.org.uk/tax-guides/employment/employment-benefits-and-expenses/what-travel-expenses-can-i-claim
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim32525

Looking at that I wouldn't be able to claim my training/course fees back as a taxable expense?

As a limited company these were expenses related to my company and ability to trade. However, as an employee these are just necessary expenses to remain in ticket and be employable.

Don't want to tread over the rights and wrongs of IR35, but I'm finding the experience and rate cuts hugely frustrating. 

The basic problem is that, under the old regime, your own company could have claimed tax relief on your courses, and you would have received less in salary. Now that you are treated as a direct employee, you cannot claim a deduction for much at all, as the law assumes that if the expense was necessary, the employer would pay it. That really is how it should be, and you might be able to negotiate a lower rate of pay but have the employer incur costs like training that they can claim tax relief on.

Unfortunately there is no chance of that - the agency only wants people with X tickets for X job - no ticket, no job - and I wouldn't have much scope to be negotiating a lower salary, it's pretty much rock bottom. On 37.5hrs it's about halved. More hours it becomes less painful, but still seeing about a 30% deduction.

Definitely seeing a mentality of still being treated like a Ltd company contractor, and expected to keep yourself sorted out - however all the financial benefits, flexibilities and freedoms of that arrangement are no longer there.

csgohan4

It is clear the gap between employed and limited company contractors has narrowed. It began with the reduction of tax free dividends, increase in corp tax over the last 10 years. 

The gov has made their bed and the consequences are trans industry wide.

I hope the Gov will look into IR35, but realistically they will not and think it could a money earner for them without looking at the bigger picture. 

KingOfSnake

Jeremy535897 said:

ALEXJONES1989 said:

Jeremy535897 said:

For example https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim31650
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim31800
https://www.litrg.org.uk/tax-guides/employment/employment-benefits-and-expenses/what-travel-expenses-can-i-claim
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim32525

Looking at that I wouldn't be able to claim my training/course fees back as a taxable expense?

As a limited company these were expenses related to my company and ability to trade. However, as an employee these are just necessary expenses to remain in ticket and be employable.

Don't want to tread over the rights and wrongs of IR35, but I'm finding the experience and rate cuts hugely frustrating. 

The basic problem is that, under the old regime, your own company could have claimed tax relief on your courses, and you would have received less in salary. Now that you are treated as a direct employee, you cannot claim a deduction for much at all, as the law assumes that if the expense was necessary, the employer would pay it. That really is how it should be, and you might be able to negotiate a lower rate of pay but have the employer incur costs like training that they can claim tax relief on.

I don't know if lower salary + provided training would work as OpRA would probably catch the exemptions within Part 4 ITEPA

Jeremy535897

The company should be able to claim a corporation tax deduction, and there should be no benefit in kind on the employee? Section 250 ITEPA 2003 says:

"250 Exemption of work-related training provision

(1)No liability to income tax arises by virtue of—

(a)the provision for an employee of work-related training or any benefit incidental to such training, or

(b)the payment or reimbursement to or in respect of an employee of—

(i)the cost of work-related training or of any benefit incidental to such training, or

(ii)any costs of a kind specified in subsection (2) in respect of such training.

(2)The costs are—

(a)costs which are incidental to the employee undertaking the training,

(b)expenses incurred in connection with an examination or other assessment of what the employee has gained from the training, and

(c)the cost of obtaining any qualification, registration or award to which the employee becomes or may become entitled as a result of the training or such an examination or other assessment."

Perhaps I am missing your point?