Living and working away from home as a contractor in further education

Ozmodic

In recent years IR35 tax changes means that you can no longer work in further education as a contract / temporary Tutor as a self employed person.  My understanding of this in practice this means that we are unable to claim living and travel expenses.  Is this correct? It seems unfair as it seems that employees can claim expenses when living away from home and non-IR35 contractors can claim expenses. so why target people working through agencies but compelled to work through umbrella companies??? Any help to clarify this please? 

flaneurs_lobster

Don't think the IR35 protocols or your employment status have any bearing on your ability to claim expenses. Expenses can be claimed by anyone from any body that is willing to consider and pay them.

What is constrained is the ability to have these expenses reimbursed out of untaxed income.

Grumpy_chap

Ozmodic said:

In recent years IR35 tax changes means that you can no longer work in further education as a contract / temporary Tutor as a self employed person.  My understanding of this in practice this means that we are unable to claim living and travel expenses.  Is this correct? It seems unfair as it seems that employees can claim expenses when living away from home and non-IR35 contractors can claim expenses. so why target people working through agencies but compelled to work through umbrella companies??? Any help to clarify this please? 

Does the employer / end-Client / College allow you to claim reimbursable expenses for travel / living away within the inside-IR35 contract that you have?

Do you have an option to go fully PAYE with the College?  Would you then be able to claim these expenses?

If you have an inside-IR35 contract and are not able to claim expenses, you may be able to claim tax relief of mileage based upon the AMAP rates when preparing your SA return.

ProcessMatters

To add a bit of clarity to what’s already been said:

IR35 itself doesn’t stop expenses being paid, but when you’re inside-IR35 (or working via an umbrella) HMRC generally treats you as equivalent to an employee for tax purposes. That’s why relief for living-away-from-home costs is usually blocked — employees normally can’t claim those either.

Where people sometimes still get relief is limited business travel (e.g. mileage at AMAP rates) if it qualifies and isn’t already reimbursed, but ongoing accommodation/subsistence is rarely allowable under umbrella arrangements.

The perceived unfairness mostly comes from the different tax treatment between genuinely self-employed contractors and roles that HMRC considers employment in all but name.

MyRealNameToo

Ozmodic said:

In recent years IR35 tax changes means that you can no longer work in further education as a contract / temporary Tutor as a self employed person.  My understanding of this in practice this means that we are unable to claim living and travel expenses.  Is this correct? It seems unfair as it seems that employees can claim expenses when living away from home and non-IR35 contractors can claim expenses. so why target people working through agencies but compelled to work through umbrella companies??? Any help to clarify this please? 

IR35 doesnt apply to self employed people, only those working via a company. In certain sectors they have never been happy having self employed people because of the risk the person could claim they were actually an employee or worker making their client/employer liable for things like sick pay and holiday. 

An agency will allow you to claim whatever the client is willing to reimburse, if the client doesnt want to spend money on your lodgings then the agency won't allow you to claim it. You can apply for tax relief from HMRC for allowable expenses which your employer won't reimburse

Grumpy_chap

MyRealNameToo said:

You can apply for tax relief from HMRC for allowable expenses which your employer won't reimburse

That would commonly allow some relief with respect to business mileage.  Relief for lodgings is more challenging to claim.

Ozmodic

Thanks all for the feedback. I know that the IR35 has caused a shortage of people working in education due to the cost of travel and subsistence which you could claim before it was introduced as a self employed contractor. The word 'allowable' is where I am struggling because the HMRC seems to say that they will not allow a claim against 'home to work'. While this may mean every day from loggings to work it could also mean home to loggings, so I am still in the dark here??? To be more specific I travelled to my place of work Sunday and home Friday evening and stayed for 5 nights while working 150 miles away. Not sure if this helps. The agency would not pay any expenses. I wonder why this could not be something which could be claimed through the umbrella company which again doesn't seem to do much for the money I pay it and of course means that I am in essence employing myself but unable to 'pay myself' expenses! I recently completed my tax return and did not claim anything even though the cost each week was £250 to myself… Needless to say I gave up after 3 months as it seemed like I was working to pay for travel and accommodation.

MyRealNameToo

https://forums.moneysavingexpert.com/discussion/comment/81856261#Comment_81856261

How much are you paying the umbrella? I used to pay £80 a month which has to cover all their operational costs, payroll, call centre, providing my insurance (which is almost £80 a month on its own for my company), SSP and other statutory payments, managing pension etc.

Dont know what you are paying yours but £80 a month isnt going to cover all that plus be sufficient to cover your travel expenses.

IR35 first came in in 2000, have you been contracting 25 years? Your questions dont seem to suggest you have

Grumpy_chap

I agree with MRNT that the fees charged by Umbrella Companies are competitive and I, for one, struggle to see how the UCs actually manage to stay in business.

It is obvious that the OP's gross day rate has to cover the UC fee, pension, and any amount that is allowable and processed by the UC as expenses before the resulting salary calculation (including employer NI, apprentice levy) can be undertaken.

Ultimately, it is the OP's choice to take a contract role that is far from home. They could, instead, take a role closer to home even if it paid less per hour. AIUI, a PAYE employee with a staff role that required staying away from home would not be able to claim tax relief against the costs of travel to the workplace or local digs.

monkey-fingers

https://forums.moneysavingexpert.com/discussion/comment/81859510#Comment_81859510

Just a point of note, whilst IR35 did come in around 2000, the rules changed significantly in 2017 for large businesses and again in 2021 for medium size businesses.

Up until then, the contractor could determine their status. So companies didn't really care, because they had no liability.

Many public sector organisations, in particular, have a blanket "Everyone is inside, take it or leave it"

penners324

Travel expenses are designed to cover one off travel costs. Not living closer to work.

That Would be a taxable benefit in this instance.