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Umbrella Companies - too good to be true?

Discussion in 'Supply teaching' started by azzie, Jul 23, 2015.

  1. azzie

    azzie New commenter

    Can I really claim my petrol and food allowances? It would make a substantial difference according to the Umbrella company I spoke to - what is the downside and does anyone use them?


     
  2. les25paul

    les25paul Star commenter

    There is a lot of discussion about the use of umbrella companies on this forum about how useful they are or even if they are legal. Some agencies give the choice of being paid through them or via PAYE and the most common advice is to aviod them if you can.

    But if you must use them then "yes" you can claim for petrol and food. The rules might vary between companies but the one I sometimes use states that you must keep a receipt for all food purchases, this does not include items you might buy for a packed lunch but items bought in a school/college canteen (they claim that packed lunch items come out of your normal household supplies).

    As for petrol they do not ask for receipts (not so easy to separate petrol used for work or not) but ask you keep a log of mileage. You can then claim for mileage at different rates ie; by motorcar, by motorcycle, by bicycle or public transport (for which you will have receipts). You are supposed to claim for the distance you travelled that day but not include any detours you might make to go shopping. There is no other check so I suppose you could travel by skateboard and claim you drove a Ferrari. [​IMG]

    The company can ask to see your reciepts and travel log for up to six months after your claim.
     
  3. nearmiss

    nearmiss Lead commenter

    However, the payments for this claim is not made as a cash refund. It is written off against tax. So you don't get more money per se, you just pay less tax.

    This is where the problem lies. Since you are commuting from home and living at home, the law is not clear on whether or not you are entitled to a tax offset against travel and sustenance which would only be the case if you were a consultant whose work made them live and work away from home for long periods.

    The disadvantage of this system is that you then have to declare yourself as self employed. This means that any tax advantage you gained from claiming mileage and food, disappears as you will now have to pay both employee and employers. NI contributions. Also, the umbrella company will charge a transaction fee for processing your pay claim, so ultimately you gain nothing.

    The worst case scenario, and there are precedents for this, is that you could be enforced to pay back all the unpaid tax, as you are not really self-employed and the tax breaks are not applicable to supply teachers.

    PAYE is best because tax is then paid into the system that funds schools in the first place.
     
  4. bonnie1

    bonnie1 Senior commenter

    I was under an umbrella company and I switched back to PAYE. The agencies like it because they don't have to bother employing anyone to do the payroll, they pay less, and you seem to get more pay. As nearmiss says, its a bit of a con and the taxman could come back at you. The umbrella company makes sure they have nothing to do with what you claim. They'll encourage you to do it, but they always make comments like 'If that's what you eat for lunch, then yes you can claim it'. If the taxman got hold of you they would put the blame on you.
     
  5. teacha

    teacha Occasional commenter

    I agree with everything that has been said above. Avoid UCs and stick to PAYE. Once you have paid both lots of NI contributions, in addition to the UC fee, you will be out of pocket - plus, you are on very dodgy ground with HMRC.
     
  6. There is also a lot of conflicting information regarding claiming for travelling expenses and food. Example, some UCs say you can claim for travel but others say you can't because you are at the same school each day but different if you are at a different school each day.

    Some say you can claim for food while others say you can't. Now obviously you can either claim for these things or you can't. It can't be a bit of both with different UCs. Because of the conflicting information and for reasons given by others, it's always much better to be paid by PAYE.
     
  7. peakster

    peakster Star commenter

    Do not claim your petrol and food expenses - you are no longer entitled to do this and it will make your tax return far more difficult.

    Better still try not to use an umbrella company.
     
  8. That's right about food expenses. It was stopped fairly recently but some UCs still say you can claim for it. Whether they haven't caught up with new rules or whether they have and just want to attract people I don't know.
     

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