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Self employed paid expenses

Self employed, expenses paid by the company I do work for

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Good afternoon, 

 

I have recently started as a self employed Health and Safety Consultant. I work for 1 company who pay me a day rate, plus 25p per mile mileage expenses. They also give me £20 a day subsistence if I have stayed in a hotel (which they pay for). 

What I'd like to know is, do I need to pay tax via self assessment on the 25p a mile that they give me, or is that tax free?

 

I look forward to hearing your thoughts.

Thanks in advance. 

 

Rob

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By David Ex
03rd Oct 2021 15:32

Sounds like you’re an employee but that’s basically the employer’s risk. You lose out on sick pay, pension contributions, etc..

Anyway, if you are self employed you need an an accountant to prepare your accounts and look after your tax obligations. You should arrange that as soon as possible.

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By DKB-Sheffield
03rd Oct 2021 15:23

The £0.25 pence per mile will be taxable as income. However, you may be able to claim relief on the travel (either using Approve Mileage Rates (£0.45/£0.25 per mile), or allowable costs of using your vehicle for business). Your accountant should be able to advise in what is appropriate to you as there are eligibility rules to consider.

Likewise, the subsistence of £20 will be also be income but you may ge able to offset actual costs or flat/ benchmark rates. Again, your accountant will be able to advise accordingly.

You may also be advised to double-check with the accountant that there are no issues regarding the hotel stay. Whilst you say the client pays this, you don't state whether this is reimbursed or directly contracted.

Notwithstanding the above, tge big elephant in the room is whether you are truly self-employed! Working for (solely) one contractor may be classed as deemed employment.

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Replying to DKB-Sheffield:
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By Rob Walters
03rd Oct 2021 17:50

Thank you for your response.
As I have only been doing this for a week, I don't yet have the funds for an accountant, but I will at some point. I simply needed to know what to budget for.
With the mileage side of things, that makes a lot of sense, so thank you.
The subsistence expenses I will refer to my accountant when I have one.
The hotel side, its paid for me, its not something I claim back from the company I work for.
With regards to being self employed, the job was advertised as self employed and I invoice for the days worked at the end of the month. I don't get annual leave, pension etc from the company that I do work for. Again, thanks to your thoughts, I will put it to my accountant once I have appointed one.

Once again, thank you for your help/advice, it has made things much clearer for me with regards to mileage. I could be doing around 50,000 miles a year, so the tax element could add up significantly!

Thanks
Rob

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Replying to Rob Walters:
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By john hextall
06th Oct 2021 10:37

One item you will need to budget for is accountancy fees. I recommend that you should appoint an accountant as soon as possible, they will usually only bill you after doing the work but they will have some excellent advice about what you should do from the outset.

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Replying to Rob Walters:
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By legerman
21st Oct 2021 15:23

Rob Walters wrote:

Thank you for your response.
As I have only been doing this for a week, I don't yet have the funds for an accountant, but I will at some point. I simply needed to know what to budget for.

Find an accountant that will let you pay monthly, you'll find there's a fair few that will, I certainly do Getting on board when you start rather than leaving it last minute will reap dividends.

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By Tax Dragon
03rd Oct 2021 17:54

It's not a deemed employment. I'm not sure there's even such a thing as a deemed employment. At least, not for tax purposes - there's been a minor kerfuffle about non-employed workers in some cases having rights that you'd normally associate with employment.

But that's by the by. I agree on the tax front - if a client pays you something, or pays for something for you, that's part of your income from that client.

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Replying to Tax Dragon:
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By Hugo Fair
03rd Oct 2021 21:40

"I'm not sure there's even such a thing as a deemed employment" ... not entirely true even though I agree with you (depending on the semantics and grammar)!

To the best of my knowledge the phrase 'deemed employment' does appear within legislation (ITEPA 2003 s54) ... but in the context of services provided through intermediaries (aka IR35), so not sure of relevance when directly contracting a person as self-employed (as opposed to via a 3rd party)?

The real problem can be laid at the door of HMRC and it's linguistic barbarians, who have taken the two separate words and proceeded to use them throughout their guidance as a single two-word status.
AFAIK there is no legal definition of 'deemed employment' as an employment status (as there is for worker or employee or self-employed - although the definitions of these can vary within different sets of legislation).

However HMRC not only use it copiously throughout their guidance, they even used it in draft versions as the name of a data item within the FPS (but have since changed it to 'Off-payroll worker subject to the rules' indicator) ... which doesn't easily trip off the tongue, so is often referred to as 'Deemed employee' indicator!

Not really going anywhere with this - just trying to explain why the phrase exists.

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Replying to Hugo Fair:
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By Tax Dragon
04th Oct 2021 03:42

Oh I don't doubt I was being pedantic. Had DKB simply omitted the word "deemed" I would not have commented. But I'm a tax bod. Tax legislation often "deems" things and it's important to understand this when it comes to interpreting such legislation.

Actually, the IR35 legislation provides a good example. There's a tax charge as if the worker received employment income from the intermediary. That's a deemed payment. Being charged as employment income, it's called the "deemed employment payment". See s50. The amount of the deemed employment payment is determined in accordance with the section you mention, s54. What there isn't is a deemed employment.

IR35 is of course irrelevant to the OP's situation. I tend to agree the view that the OP could do with hiring an accountant. This forum, some might say, is not an accountant.

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Replying to Tax Dragon:
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By Hugo Fair
04th Oct 2021 16:59

For what little it's worth, I did say I agree with you ... and the IR35 legislation does indeed provide a good example.
My point was that the reverse could be said of much of the related HMRC guidance - which has taken a thing (employment payment) that can be deemed in certain circumstances and created something else as a precursor (deemed employment) that doesn't actually exist.

It was when I (and no doubt others) pointed out that the single holistic thing they'd invented was allowing people to attribute employment terms/rights in situations where no such terms/rights existed that the wording was changed within the RTI returns ... but hasn't made it into much of their general guidance.

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Replying to Hugo Fair:
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By Tax Dragon
04th Oct 2021 19:22

Weeeellll, yes, maybe. Although the legislation doesn't deem there to be an employment (remembering that "deeming" means treating something as that which it's not), it (specifically s54) does ask questions such as: what expenses that were incurred would have been deductible (eg under s336) had there been an employment? Answering that could mean mentally pretending that there was an employment.... so you're not deeming an employment, but you are pretending a little bit that there was one... quite a subtle (but important) distinction... and maybe you're right that HMRC guidance doesn't bother with such nuances.

None of this is remotely relevant to the OP. In his case, if there's not an employment there's no deeming - no pretending, no nothing - there to be one.

D'you know what, this has been a massive diversion just because of one misplaced word. I think in future I might just let Aweb misstatements stand. (Pretty sure many other contributors reached that decision a long time ago.)

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Replying to Tax Dragon:
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By Hugo Fair
04th Oct 2021 21:27

No problem. Your irritation with one misplaced word happened to chime with a long-standing similar itch of mine - but of course doesn't help OP one iota.

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By Bilal trainee accountant
03rd Oct 2021 18:43

Yes, I believe that the 25p/mile mileage is taxable as it is classed as 'other operating income' and therefore will be taxable. However according to information on the government website, mileage allowance payments can be paid to the employee up to a certain amount without having to report them to HMRC and this is known as an approved amount. This relates to the first 10,000 miles. This 'approved amount,' is calculated by multiplying the 45p by 10,000. So the Mileage allowance payments on your first 10,000 miles are tax free to my understanding, but anything above this is taxable income and will be included as 'other operating income' in your tax return. For any mileage above 10,000 miles, it will be a 25p/mile tax free allowance. Anything above this is taxable. Here is the URL of the site that I am referencing:
https://www.gov.uk/expenses-and-benefits-business-travel-mileage/rules-f...

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Replying to Bilal trainee accountant:
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By David Ex
03rd Oct 2021 23:08

Bilal trainee accountant wrote:

… mileage allowance payments can be paid to the employee up to a certain amount without having to report them to HMRC

The OP says “self employed Health and Safety Consultant”. RTQ.

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Replying to Bilal trainee accountant:
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By Leywood
04th Oct 2021 11:38

You have not even yet reached the officially qualified level for a bookkeeper in your studies, yet you are giving (incorrect) tax advice out!

Wonder what your boss and your professional body would think of you providing tax advice to members of the public, am pretty sure the latter would take that up as a disclipinary matter which could see you with fines or even expulsion.

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Replying to Leywood:
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By Tax Dragon
04th Oct 2021 12:09

That's the great thing about this forum.

If we had to stay within The Usual Rules of our professional bodies (and indeed of the law), none of us couldn't ever reply to OPs like this one.

But I guess Usual Rules don't apply.

Hooray for Aweb. Downside is anyone can post any old crap. (Just as well for you and me, eh? :-p)

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Replying to Tax Dragon:
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By Tax Dragon
21st Oct 2021 06:54

Tax Dragon wrote:

Downside is anyone can post any old crap.

Not 'any', apparently.

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Replying to Tax Dragon:
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By I'msorryIhaven'taclue
21st Oct 2021 10:39

Hey, welcome back TD.

Were you on the naughty-chair?

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Replying to I'msorryIhaven'taclue:
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By Tax Dragon
21st Oct 2021 10:46

Thank you.

Yes. (Hence my reporting back "not 'any'".)

Did I miss anything?

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Replying to Tax Dragon:
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By Leywood
21st Oct 2021 12:15

Thought you might be on your jolly holidays! That was a long ban for no reason.

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Replying to Tax Dragon:
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By Paul Crowley
21st Oct 2021 11:01

Good to see you back from the labour camps and re-educated
Your comrades now accept you as an equal

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Replying to Tax Dragon:
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By Paul Crowley
21st Oct 2021 11:01

You can write any old techically incorrect rubbish you like
but do not dare upsetting the snowflakes

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Replying to Paul Crowley:
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By Paul Crowley
21st Oct 2021 11:04

I wonder who the snowflake was?

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Replying to Paul Crowley:
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By Leywood
21st Oct 2021 12:14

I will give you 3 guesses Paul, pretty easy to work it out from this thread.

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Replying to Leywood:
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By Tax Dragon
21st Oct 2021 12:39

Impossible to work out from this thread, as it happens. I wasn't sin-binned for what I said here. (Do you think I should have been? Then report me.)

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Replying to Tax Dragon:
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By Leywood
21st Oct 2021 12:50

I dont think you should have been for what you said here. Do tell, what was it then?

I only report dodgy spammers.

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Replying to Leywood:
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By Tax Dragon
21st Oct 2021 13:18

It really doesn't matter. (My fault anyway. I have a habit of sinking into sarcasm when I'm tired/offended/emotional. Sometimes it's mild enough to avoid offending anyone - I can't see anyone really taking issue, for example, with my contemporaneous references to a company most famous perhaps for a carbonated soft drink that shares its brand name, though clearly I am employing sarcasm in those comments. Sometimes it's more, erm, barbed. Barb turned up a few weeks back and got me sent back to my den to think on it.)

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Replying to Tax Dragon:
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By I'msorryIhaven'taclue
21st Oct 2021 15:45

I came across a thread in which Tallulah admonished the entire panel for rowdy behaviour, which looked rather incongruous because the thread had been cleaned up so that only the very politest posts remained. Your contributions had been zapped, so I'm guessing that was your red card day.

I have no idea what you've missed as I've been some weeks on the couch / in bed gasping for breath like a goldfish out of water, having been misinformed by the Wolverhampton test lab that my PCR test was all clear. Me and thousands of others - Pah!

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Replying to I'msorryIhaven'taclue:
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By Hugo Fair
21st Oct 2021 17:21

I'm guessing you mean https://www.accountingweb.co.uk/comment/878363 - which has been so mangled as to be pointless.
I complained at length about this, but have received no reply (after the initial 'acknowledgement' in which I was told that I had "made a sarcastic remark about their (OP's) query").
I won't bore you with exact wording of my 'sarcasm' - but it expressed incredulity at an earlier response, before going on to calmly & politely state why I felt the point had been missed in that response! TD got caught in the resultant crossfire.

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Replying to Hugo Fair:
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By Tax Dragon
21st Oct 2021 17:37

This thread has become so side-tracked as to be becoming equally meaningless. We should have started our own.

Sorry to hear about your woes, Mr Clue. Good to see you back too.

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Replying to Tax Dragon:
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By I'msorryIhaven'taclue
21st Oct 2021 18:47

Thanks TD. On the plus side I've given up smoking, hooch, and lost 20 lbs! Every cloud...

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Replying to I'msorryIhaven'taclue:
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By Hugo Fair
21st Oct 2021 20:16

Not *every* cloud (at least not those hosting MTD software). :-)

But glad to hear you're recuperating ... and with such impressive side-effects!

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Replying to Hugo Fair:
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By I'msorryIhaven'taclue
21st Oct 2021 18:56

That's certainly the thread (or the remnants of it).

I see not all of your lines were cut, Hugo. Your gentle sarcasm survived in part.

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Replying to Hugo Fair:
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By Paul Crowley
21st Oct 2021 19:25

Difficult to imagine negative salary in a real universe.
Black holes exist though, so maybe on the other side

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Replying to I'msorryIhaven'taclue:
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By Paul Crowley
21st Oct 2021 19:27

That makes sense
4 October being last available identifiable TD posting
But a short banishment to the gulag
Or could it be like prison where the girls get shorter sentences as a matter of standard practice.
Odd given that the girls tend to live longer

Glad you are on the up. I noticed less postings.

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Replying to Paul Crowley:
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By I'msorryIhaven'taclue
22nd Oct 2021 09:04

I used to get a month's solitary quite regularly over on UKBF - never just a fortnight - courtesy of a rogue(ish) moderator who would sift through my every post picking dumb fights over make-believe issues. There were no winners there.

Yes, thanks - Wolverhampton testing centre and their false negative results. On the back of which result I was granted access to my GP's surgery and Ambulatory Care twice at hospital, without being tested or regarded as Covid positive. An inadvertent super-spreader!

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Replying to Leywood:
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By DKB-Sheffield
21st Oct 2021 20:43

Hi Leywood

Certainly not clear. I have not, nor would I ever dream of reporting, anyone for pointing out an obvious error in any contribution I make! TD was right, and on reflection, I chose my words incorrectly!

FWIW I am really pleased to see TD back. Her contributions are always welcomed by so many on this forum (myself included). There have been so many threads over the past couple of weeks that NEEDED her input. AWeb has certainly been a less constructive forum due to her absence.

IMHO, if members of AWeb cannot take constructive (or even any) criticism, they should think before posting! Clients, HMRC and many others give criticism daily - there isn't a magic "report" button for those scenarios!

So, now I've put that record straight, I may now be on my way to the sin bin for so doing!

Welcome back TD!

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Replying to Leywood:
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By Bilal trainee accountant
04th Oct 2021 14:43

I apologise for giving incorrect advice, if self employed, you must declare everything. It is only if you are employed that your employer doesnt need to declare it. The link that I posted doesnt apply to self employed individuals.

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By Bilal trainee accountant
03rd Oct 2021 18:47

If your employer is only paying you 25p/mile then I think that you wont have to declare it. Its only if your employer pays you above 25p per mile that you will have to declare it.

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Replying to Bilal trainee accountant:
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By Jane Wanless
03rd Oct 2021 19:42

The poster advised that they were working on a self employed basis. The advice re ignoring the 25p/mile from the employer is therefore advice on an incorrect basis.
(And if employed, the 25p would need to be taken into account in determining the additional amount that could be claimed for the first 10k miles.)
Best get an accountant to sort it out, rather than rely on free advice, some of which may not be correct or apply in your circumstances.

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Replying to janewanless:
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By AdamMurphy
04th Oct 2021 17:28

Especially trainee advice.

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By Swabber
06th Oct 2021 10:16

Regarding the subsistence payment, my understanding has been that an expense is claimable for occasional travel but not when an integral part of the job is daily travel - on the grounds we have to eat whether we are working or not. How wrong am I?

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By heatherdavid
06th Oct 2021 10:47

....and, if turnover increases (ie the business is sufficiently successful), don't forget about VAT (the queried receipts are not 'disbursements').
I would still be wary about whether this really is 'self-employment', but, as other respondents have said, that is a problem for the 'employer' (since IR35 not in point).

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By ianthetaxman
07th Oct 2021 17:35

OP - once you have engaged an advisor no doubt they'll clarify all of the points being made on here.

In the meantime, as your query was really about the tax that might be due on your expenses payments received, you might want to spend some time and look at whether you really are self-employed or not.

Loads of commentary and opinion online on this. If you Google 'CEST tool' you will find an HMRC link that is supposed to help you decide if you are employed or self-employed, and gives you some idea of the issues being bandied around on here. The tool has had a bad reputation for being biased in favour of employment, but hey, what d'you expect - it was set up by HMRC and they want the tax now, so PAYE works for them.

Hope you find your answers.

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