This is additional guidance on how the allowing and payment of expenses has changed since April 2016. This is intended to be practical working guide, rather than a “technical critique”, and everything below is available in more detail should you wish it.
So what has happened?
In April 2016 there was a change that effectively stopped what had been known as an “umbrella worker” treating all work sites as automatically temporary. Instead each single assignment must be looked at separately. If the assignment is at one location then that’s the “normal” workplace and the worker “commutes” to it and no expenses are allowed. But if the assignment requires you to go to different work places (and no one work place is for more than 2 years) then essentially in respect of that assignment nothing has changed.
There has also been a second change that means that some expenses cannot be paid by a company to its workers if the payment of the expenses can vary the level of salary. So if higher expenses mean a lower salary, or the other way round (known as “salary sacrifice”) then some expenses cannot be paid “as you go” and can only be claimed by the worker at the end of each financial year.
We have drawn reference to this in our Expense Guidelines to all workers as follows;
How is my claim paid? The rules concerning the reimbursement of expenses changed in April 2016 and in all cases where we are able to reimburse expenses we will. However where we are unable to pay you your expenses we will still audit them and log the expense to allow you to reclaim the tax paid at year end.
This means our ability to pay you certain expenses can depend on whether any reimbursement of the expense is totally separate from the money that you earn for the work that you do. Where it is we will always look to reimburse you accordingly. The nature of any assignment may mean expenses are fixed and/or entirely separate from the payment for the work done and we will always work with our agency client and/or possibly their client in order to determine when this is the case.
So what does this mean in practice?
To begin with Mileage can be paid regardless and can alter or vary salary. However in respect of pretty much all other travel and subsistence (T&S) expenses we need to ensure that reimbursement of the expense does not affect or vary the salary payment. It is possible that expenses can be fixed amounts (the same amount each week reimburses expenses) or they might be paid up to amounts claimed (where this is acceptable to a client). However, to be clear, what can’t happen is for any amount that might have been “set aside” to reimburse expenses to be paid instead as salary if an expense claim doesn’t come in.
What that means is that if it is agreed that say £50 per week is available for the reimbursement of expenses and a claim comes in for £40 one week then the worker can only be paid £40. The £10 can happily be paid back to the agency, but if it is paid to the worker then it could only be paid as salary and therefore will mean the salary has varied as a result of the lower claim…
So how does this work in practice?
If you are on an assignment and you will travel to more than one worksite or between worksites then you are allowed to claim for your T&S. Where you drive to the sites in your own car that is fine and we can allow the appropriate mileage rate. However if you use public transport and/or need to buy food and drink during your working day then we have to consider the “salary sacrifice” rules but we can help you as follows;
“Year end/P87” Claims We can process, audit and log any allowable expenses. This way you don’t lose the tax you have paid as you can reclaim it at the end of each financial year. Where your logged total less than £2,500 then the claim is made on a Form P87. Where it is for more it will be necessary to complete a self-assessment tax return. In either case we will provide you with the information relevant to the expenses that you will need.
“Fixed” Expenses Relevant where expenses are consistent and there is a guaranteed minimum amount per day that you know it will cost you, even on the shortest day, on the site closest to your home, in allowed expenses. As that can be deducted from the payment we receive from the Agency it can be paid to you tax free on submission of your claim as it will be irrelevant to the salary you receive for the work you do. It cannot be varied. If your claim is for a lesser amount we will have no other way to pay you the money. If it is for more we will process, audit and log the excess amount of the claim above.
“Additional” Expenses Where a Client requires you to travel from place to place they may be prepared to pay back certain expenses (usually up to certain amounts) that are reasonably incurred as you travel (particularly) to further sites. They may already do this with their own staff. Where this is the case then the payment of these expenses will be irrelevant to the salary you receive for the work done at these sites and therefore will be allowable and payable without deduction. If your claim additionally includes amounts that are allowable but are not a part of what the Client has agreed to pay then we can look at either or both of the first two options as well.
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