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Mileage Allowance for Home to Work

I have a new client who works as a small electrical contractor for just one firm. He thinks he can claim a daily meal and mileage allowance, as he says his colleagues claim this through an umbrella company. I have advised this is not an allowable tax deduction, and if he insists on claiming, he does so at his own risk. Client now does not communicate, I have completed his company accounts and need payment for my time, though he has not given me an authorisation code. I think he has not previuosly paid any Corporation tax as he did not even know what his correct UTR was. I feel I will have to issue a county court summons in order to get my money, as it does not appear likely he will meet me to sign off accounts.

I think I may have other clients claiming mileage for home to work. The point is I am worried about losing them as well. Another client is putting through what I think are may private transactions through their company bank account, I have queried this but no response. I lost my job once because directors were putting through large private transactions which I found unnacceptable.

The point I am making now is that you try to do the right thing by operating within the law and take the risk of losing clients - it is depressing. Do I just turn a blind eye or what?

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It might be allowable

as a staff cost for his company. Whether it is taxable on him and should pass through payroll/PAYE is another matter

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It is available due to the temporary place of work rules?

In terms of what should you do - do it right I would say. If you do as the client wants then it will come back and bite you in the longer term, moreover if you are the accountant that DOES put in the dodgy stuff then all you are going to attract is other dodgy clients fired from the rest of us....what I do is explain the easiest thing for me to do would be to agree with their costs, but if there is a tax investigation tomorrow, and that is always the assumption when preparing a set of accounts, that I couldn't defend their position, and if that is the case we ought not be including the costs. It normally works, even if they dont like it.

On a wider point whilst "the man in the pub" always seems to puts in all sorts of unlikely claims, even if they do and its not a tall tale, its highly likely their accountant pulls it all back out again, or has good reason for their inclusion if those expenses do make the final cut. 

 

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Thanks for this. It is not a temporary place of work as he goes there nearly everyday, and

this would be regarded as a commute. He thinks he can claim 52 weeks at whatever miles it is at 45p, plus meal allowance. It is just ridiculous, so I think I am doing what is right. At the

end of the day I have indicate if he still wants to claim then he does so at his own risk. I would

prefer not to have dodgy client who think they should pay little or no tax, and that accountants

somehow have a magic wand. It is important that they pay the correct tax. now I am stuck with

having to recover my money as a result.

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My thoughts

With the first client.  You say that you have completed the annual accounts so ask him to attend a meeting to discuss them at which full payment of your bill will be required and send him a copy of the bill prior to the meeting.  In cases where the professional relationship has broken down I tell the client that nothing will be submitted to either CH or HMRC without my bill being settled first.  Once settled I submit what I need to and then send a formal disengagement letter.

I am assuming that both clients are non audits and only require accountants reports?  If so your legal obligation is to prepare statutory accounts from accounting records and information supplied to you by the client.  Everyone has a different ethical stance but my approach would be to ask the client what the dubious expenditure was and explain the implications of private expenditure in the accounts etc.  If they then told me its legitimate business expenditure it goes in the accounts along with a detailed note of the conversation on file.  Should it transpire at a later stage (ie HMRC enquiry) that this was not the case then the client can only blame themselves.

 

 

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Unresponsive clients

dreamcatcher wrote:

With the first client.  You say that you have completed the annual accounts so ask him to attend a meeting to discuss them at which full payment of your bill will be required and send him a copy of the bill prior to the meeting.  In cases where the professional relationship has broken down I tell the client that nothing will be submitted to either CH or HMRC without my bill being settled first.  Once settled I submit what I need to and then send a formal disengagement letter.

I am assuming that both clients are non audits and only require accountants reports?  If so your legal obligation is to prepare statutory accounts from accounting records and information supplied to you by the client.  Everyone has a different ethical stance but my approach would be to ask the client what the dubious expenditure was and explain the implications of private expenditure in the accounts etc.  If they then told me its legitimate business expenditure it goes in the accounts along with a detailed note of the conversation on file.  Should it transpire at a later stage (ie HMRC enquiry) that this was not the case then the client can only blame themselves.

 

 

 

Yes, I have adopted both these procedures as you suggest, trouble is neither of them will reply. I think the first case wants to continue doing it himself the wrong way. He has £50000 and puts almost the same down as cost of sales, submits himself to CH accounts that are totally wrong. He has signed an agreement for me to do the work and he should pay me even if not submitted. I suspect he won't give me the authorisation code in any case.

The second one is a long serving client, always in hospital apparently, particularly when the time comes for preparing accounts! I cannot proceed further with their accounts until my queries are answered. Both are non audit Limited companies.

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It sounds..

[/quote]

Yes, I have adopted both these procedures as you suggest, trouble is neither of them will reply. I think the first case wants to continue doing it himself the wrong way. He has £50000 and puts almost the same down as cost of sales, submits himself to CH accounts that are totally wrong. He has signed an agreement for me to do the work and he should pay me even if not submitted. I suspect he won't give me the authorisation code in any case.

The second one is a long serving client, always in hospital apparently, particularly when the time comes for preparing accounts! I cannot proceed further with their accounts until my queries are answered. Both are non audit Limited companies.

[/quote]

to me as if the first client will probably ignore any accounts you prepare anyway and submit his own set of accounts to CH and maybe HMRC. So to be honest it wouldn't bother me if I got the authorisation code or not.  My aim would be to get my bill paid, provide the client with a signed set of accounts and then he can do want he wants with them. 

If you haven't already done so send both clients a bill in the post (whether final or interim) so then at least the clock is ticking in terms of being able to pursue the debt.  Along with the bill include a letter formally inviting them to a meeting on x date/time so that you have written proof you tried to contact them to move things on.  Then if as you suspect they are no shows you can pursue the debt once your credit terms have been exceed.

Good luck

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Check Umbrella Company Rules

I believe that Umbrella companies do get the tax back in circumstances like this for their clients even on long term contracts. In which case your clients colleagues may be telling the truth. How it works I am not sure as I have never got involved in it.

Your post has made me inquisative and I will look into it. I imagine that somehow using the umbrella company status allows the temporary place of business rules to apply.

I think it's worth checking out. Jusy a thought.

 

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I am not sure about this either

hertsaccountant wrote:

I believe that Umbrella companies do get the tax back in circumstances like this for their clients even on long term contracts. In which case your clients colleagues may be telling the truth. How it works I am not sure as I have never got involved in it.

Your post has made me inquisative and I will look into it. I imagine that somehow using the umbrella company status allows the temporary place of business rules to apply.

I think it's worth checking out. Jusy a thought.

 

Well, he is not using an umbrella company anyway. I posted him a couple of links

that state clearly daily meal allowance is not allowable without receipts. You can only

claim for overnights away, not a daily allowance. I thought HMRC had tightened up

their rules a lot in the last 2 years in this respect. In any case he has not given me

any written authorisation to include these, despite me asking. I suspect he prefers to continue paying

no CT. Again HMRC are not too strong on this. The other client when asked has no income at all

apparently, whenever I ask, then I have to submit a nil SA return. Very suspicious.

 

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Most umbrella companies apply for the scale rate dispensation which does allow them to pay a daily rate without seeing a receipt provided the person claims for it and confirms they incurred a cost. They are supposed to keep receipts and may be asked on a random basis to produce one.

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Why are you so sure he cannot use temporary workplace rules?

On the basis that has he runs his own company then his permanent workplace will normally be his home. It doesn't matter if he goes somewhere else every day provided that the duration of the contract was (or was expected) to last less than two years. If this is the case then it will be capable of being a temporary place of work and mileage will be allowable. This is how all PSC's work I think you'll find.

As for a daily meal allowance ... why have you not agreed a dispensation with HMRC? it is likely that they would agree to something reasonable. This is what the umbrella providers have done.

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agree with Steve and ...

if the travel is allowable, then subsistence for the same journey is also allowable.

Come on George, I'm right aren't I?

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Oh yes...

... let me take this most opportunistic of opportunities to type the most unecessarily long of

unnecessarily long posts, solely for the purposes of being able to do the most unecessary

unecessary thing of all and hit the newline key at the end of each line.

 

Red Leader you are indeed correct that once travel is an allowable employment expense, then

it follows that any subsistence must also be such an allowable employment expense, and as the

inimitable Mr Holloway suggests could be covered by a dipensation at flate rate agreed with

Her Majesty's most kind, gracious and competent joint Inland Revenue and Customs and Excise

organisation.

 

Can I just add that WORD WRAP'S THERE FOR A REASON!!

That goes for you too Arthur Phillips (for whom spell check would also be a useful tool).

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It is possible to put through these expenses if he's going to a temporary workplace.

There is a 2 year rule that may be relevant if he's been performing duties for this client for more than 2 years (or expects to). 

There may be all sorts of IR35 issues too!

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24 Month Rule / 40% Rule

Don't forget with the 2 year T&S rule that it is about awareness of the contract being more than 24 months at that site.  

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Have you considered IR35? 

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Could someone explain me how it realy works please.

Up to today I thought that you cannot claim travel expeses from home to your work place if you are employed. But in case of providing the servis through your company or as self employed this is allowable expense (?)

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Home to work is not allowable

The argument for s/e or company would be that the base of operations was the home, so that travelling to the client is not travel to work, but travel to a client from the business base, which happens to be home.

That said in the OP's case the chances are that the base might not be home but the firm he contracts for, in which case for s/e it would be an expense to be added back in arriving at taxable profit, and for a company it might be allowable in the company as a staff cost, but taxable on the director through PAYE

 

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thank you

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Check your initial premise! ....and some other points

 Your client is running his own business which is a limited company providing electrical contracting services. That business is (I presume) registered at his home address.

The company provides services (at present) to a single client.  The travel that the company's employee is doing is not "home to work" but in fact "work to a client site".  This should as a starting point clarify why the travel being undertaken is considered to be business travel and therefore claimable as an allowable deduction of this business.

Once clear on that principal you can then factor in the 24 months rule, which has already been more than adequately explained by the other posters.

You make note in your original post that your clients are not responding to you and you leave me with the impression that you believe this is because they are "dodgy". I would though proffer an alternative interpretation - which is that they may have realised that their accountant is not as well versed in the specific areas of tax and accounting that that pertain to their sector/ industry.

If you are going to engage more clients (or in fact retain current clients) who operate in the contracting sector then I would most definitely recommend that you do some further CPD.  Lots of specific contractor related reading out there which is readily available.

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