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Are subsistence claims firmly attached to the 24 month rule ?

Are subsistence claims firmly attached to the...

Contractor A is an employee of his own ltd co and working at a client site on a fixed term contract of 12 months, and is regularly claiming mileage from home (the registered office and permanent workplace), and is also claiming for lunch when on site - 3 miles away.

Contractor B is an employee of his own ltd co and working at a client site on a contract of uncertain duration which has now reached 24 months, and was regularly claiming mileage from home (the registered office and permanent workplace), and was also claiming for lunch when on site - 3 miles away. Mileage claim ceased at 24 months.

How firmly is subsistence, specifically lunch costs, attached to travel, and ultimately the 24 month rule?

Most commentators agree (when not specifically discussing the 24 month rule) that subsistence is defined within travel expenses, but there is some ambiguity if this is the case for the 24 month rule.

Also, some reputable contractor support websites specifically discourage any lunch claims whilst readily accepting mileage claims for A and B (B for 24 months). I have read expressions like "remote site" and "normal place of work" to allow a lunch claims for the former and not for the latter, even though they are advising ltd co contractors - but no references are given.

Two questions please:

1) Can A and B (B for 24 months) claim for lunch as well as the mileage ?

2) Can B claim lunch as subsistence after 24 months ?

If you advise against the lunch claims, though I respect that, is there a tax reference, or are we just feeling squeamish?

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By cfield
19th Oct 2015 12:23

Lunch OK, but.....

For employees at temporary workplaces, travel and subsistence claims go hand in hand. If you can claim for travel you can claim for lunch. However, the 24 month rule is widely misunderstood and often claimed in error, which is why the Government wants to change it.

For one thing, there should always be more than one contract (or more precisely, more than one workplace) through the same company, otherwise it will fall foul of the rule that the workplace must not be the main/only location at which the duties of the employment are performed.

Secondly, you must take previous or subsequent contracts into account when working out the length of the engagement, because if the sites are too close together and the journey to work does not change significantly, HMRC could argue that they run together and the clock didn't stop ticking on the 24 months when you finished the first contract

They are often wrong here, as the legislation actually refers to tasks of limited duration, not sites of limited duration. It can also be for some other temporary purpose. Hence, if the skill-sets and deliverables are different enough, you could say it's a brand new task, even if you're in the building next door.

On the other hand, if I'm counting paperclips for one client and then I move across town to count paperclips for another client, I'm doing the same task at the "same" workplace so they would run together.

Thirdly, it is the "expectation" that counts. A temporary workplace ends immediately once you expect to be there more than 24 months. This would normally happen well before 24 months is up if holidays are booked, projects planned, rosters set, etc. Your Contractor B should probably have stopped claiming travel sooner.

Fourthly, you can only claim the benchmark rates for lunch if you are away from your main place of work (the registered office) more than 5 hours (on a door-to-door basis) and buy something to eat and drink whilst you are working or traveling, even if it's just a bottle of water and a bag of crisps. It is up to the employee to keep proper records to show he/she qualifies for each day claimed, although no need to keep receipts as such, as that is the whole reason for having the benchmarks in the first place.

If you are claiming actual expenditure for meals and/or beverages, the 5 hour rule does not apply, although claims must always be reasonable. For example, you can probably claim coffee for a short business trip or visit to another branch, but not lunch. You must also take distance into account with actual costs. You wouldn't be able to claim lunch if you were just visiting the client next door.

So in answer to your questions, subject to the above, 1) Yes 2) No

 

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avatar
21st Oct 2015 13:47

I don't believe it ...........

cfield wrote:

Fourthly, you can only claim the benchmark rates for lunch if you are away from your main place of work (the registered office) more than 5 hours (on a door-to-door basis) and buy something to eat and drink whilst you are working or traveling.

'They' have just changed the Registered Office to another person's house for personal security reasons, without checking with me.

So now I'm left with a home (where some paperwork is done) to a temporary workplace.

 

 

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19th Oct 2015 12:23

Counting paperclips

I have often thought of creating a business to count paperclips.

Do you know what the market day rate is for this line of work?

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By cfield
19th Oct 2015 13:16

Paper clips

JCresswellTax wrote:

I have often thought of creating a business to count paperclips.

Do you know what the market day rate is for this line of work?

I wouldn't recommend it as you'll fall foul of the 24 month rule.

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19th Oct 2015 12:42

Tax reference

Nolder v Walters 15 TC 380.

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By cfield
19th Oct 2015 13:28

Out to lunch

Whoever drafted these arcane rules must have been "out to lunch".

Sorry, couldn't resist that one!

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By stratty
19th Oct 2015 14:37

Subsistence and Receipts

I disagree with the point raised above on not necessary to keep receipts.

If you have a dispensation in place and can operate benchmark rates on subsistence it is not necessary to present a receipt to claim the £5 etc but you need to retain some kind of proof of purchase and HMRC expect that to be periodically audited as part of the dispensation requirements.  This is to avoid abuse.

 

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By cfield
19th Oct 2015 18:05

Receipts

stratty wrote:

but you need to retain some kind of proof of purchase and HMRC expect that to be periodically audited as part of the dispensation requirements. 

Who said anything about a dispensation? They're going out of the window soon anyway, and not before time. As it happens, HMRC have back-tracked from their previous insistence that small employers keep receipts in order to include the benchmarks in a dispensation. All that is necessary is to keep evidence that they're complying with the rules. A spreadsheet would do. I can't see HMRC denying tax relief on subsistence claims if there is definitely a temporary workplace. It just wouldn't be worth their while in most cases.

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By stratty
20th Oct 2015 08:44

Dispensation

I was under the impression you needed a dispensation in place to operate benchmark rates for subsistence.  

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By cfield
20th Oct 2015 10:16

Technically yes

EIM05230 does indeed say that employers can opt to use the benchmark rates by stating their intention in a dispensation letter or on Form P11Dx, but in practice I think you can use them right from the off without bothering to do this. I've never heard of them disallowing subsistence for that reason if there is an entitlement to it.

EIM30059 also says that employees need to keep receipts, but under the Regular Checks heading, it then goes on to say they must be checked monthly, quarterly or half-yearly, after which they are under no obligation to keep them. Moreover, it then goes on to say that in smaller organisations the directors may know all about the expenses and there is no need for checking at all.

EIM05210 also says "such evidence should ideally be in the form of receipts but other evidence, such as an employee's contemporaneous record of expenses incurred, should also be considered."

On the whole, their guidance/instructions are slightly schizophrenic as they can be read both ways. In practice, if you ever had a PAYE inspection (rare as hens teeth these days), it would be so long after the event that any receipts would have long since been checked and then binned as allowed in their Manual.

Dispensations won't be necessary from next April anyway. Mind you, subsistence might no longer be claimable by persons under supervision, direction or control from next April either. We'll have to wait and see.

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