Building 3 Chiswick Park, T: 020 3818 9530

OASIS 566 Chiswick High Road,

London, W4 5YA
F: 0333 014 2238
M: 078 0669 0596
shankar@oasisaccountants.co.uk
www.oasisaccountants.co.uk
ACCOUNTANTS

Expenses Guidelines for IT Contractors

Travel Expenses
The majority of expense claims for travel relate to public transport, this includes trains, buses,
planes and taxis, all of which are allowable for expenses purposes. When travelling via taxi, its
important to ensure that their use is reasonable, such as at times or places where other forms of
public transport are not available.

Mileage

When using your personal vehicle for business purposes, the rate you can claim changes
dependant on the type of vehicle you own, and the number of miles already completed in the
current tax year.
To calculate how much Mileage Allowance Relief you can claim, use the below approved mileage
rates:
First 10,000 miles (per tax Miles over
year) 10,000
Cars 45 pence per mile 25 pence per mile
Motorbike 24 pence per mile 24 pence per mile
Cycle 20 pence per mile 20 pence per mile
These rates are inclusive of VAT, so you should not add on any further charges for VAT, unless you
are invoicing a client for your travel expenses. If you are using the standard VAT scheme, then you
will be able to reclaim the VAT, at a fluctuating rate between 1p and 3.5 p per mile, dependent on
prevailing rates at the time when the VAT is reclaimed.
In order to claim expenses, you must keep records of every journey that you take, plus receipts for
fuel including VAT (if your claim includes VAT). The VAT shown on the receipts must cover what
needs to be reclaimed.
If provided with a company car by your employer, then you will not be able to claim mileage in line
with the rates above, but if your fuel is not covered by your company, then you may be able to
claim a reduced rate (as per the advisory rates set by HMRC). Detailed logs of all relevant journeys
would need to be kept.

Company Cars

If you are unsure whether supplying a company car is a sound financial decision, it is worth
considering the below implications as either an employer or employee:
Implications for employers

You cannot reclaim VAT on the purchase of a new car. When purchasing a second-hand car, VAT is
not normally charged, but if it is then it can be reclaimed.
If you acquire a company car through a lease contract, then the monthly charges may include VAT.
Businesses which are on the Flat Rate VAT Scheme cannot reclaim any of this amount, but those
which are on the standard VAT scheme can claim back 50 per cent of their payments. If there is a
Shankar Devarashetty FCCA
Oasis Accountants is a limited company registered in England and Wales No.8359050. Registered as auditors in the United Kingdom by the
Association of Chartered Certified Accountants. VAT no: 163 3407 26
 maintenance contract for the car, which is itemised separately, then any VAT charged on this may
be reclaimed by businesses which are on the standard VAT scheme.
The value of the benefit in kind will be the same whether the car is leased or purchased outright,
but the way it is treated for the purposes of Corporation Tax will vary, as detailed below.
Corporation Tax Relief will be available on cars which are purchased outright, according to their
emissions, as follows:

Cars with emissions up to 130g/km 18% per year (reducing balance)

Cars with emissions over 130g/km 8% per year (reducing balance)
If the car is leased or hired on a contract then the Corporation Tax relief available will be:
Cars with emissions up to 130g/km 100% of lease cost
Cars with emissions over 130g/km 85% of lease cost
The benefit in kind value of a company car will attract Class 1A National Insurance contributions
from the employer at a rate of 13.8 per cent.
If the car is sold for a tax loss, then there will be no balancing allowance given, but if the car is sold for a tax profit then a
balancing charge will be levied. For this reason, it is usually more tax efficient to lease a car than to buy one, unless
emissions are lower than 110g/km.

Implications for employees

benefit in kind, the value of which will be
An employee with a company car will be considered to be in receipt of a
taxed at their marginal rate, effectively treating the benefit as salary.
The value of the benefit in kind will use up a proportion of their basic tax band, meaning that there
will be less availability for drawing tax-free dividends
An employee using a company car will not be able to claim the tax free mileage rates of 45 pence
per mile or 25 pence per mile. If fuel is not provided, they may be able to reclaim a reduced rate.

How to calculate the benefit in kind

The value of a benefit in kind is calculated using the cost of the car when purchased (including any
additional extras), the CO2 emissions and the type of fuel on which it runs. The calculation is as
follows:
Take the cars CO2 emissions and subtract 100 (unless they are below 110g/km)
Divide the remaining figure by 5 and round the resulting figure down to the nearest whole
percentage point
Add 15 per cent for petrol or 18 for diesel to find the benefit in kind percentage (up to a
maximum of 37 per cent)
Multiply this figure by the list price to provide the benefit in kind value

Low CO2 Emission Cars:

Cars classed as low emission for the purposes of the benefit in kind calculations have emissions of
75g/km or lower, if this is the case then the following benefits will apply:
Emissions Car Benefit Percentage
0g/km 0%
1 - 50g/km 5%
51 75 g/km 9%
76- 94 g/km 13%
95 - 99 g/km 14%
If the car is a diesel, then a 3 per cent premium will be added to the car benefit percentage.

Shankar Devarashetty FCCA

Oasis Accountants is a limited company registered in England and Wales No.8359050. Registered as auditors in the United
Kingdom by the Association of Chartered Certified Accountants. VAT no: 163 3407 26
Calculating the Fuel Benefit:

Any fuel which is provided for the private use of a car will be counted as an additional benefit in
kind and is calculated using the car benefit percentage, using the formula above, multiplied by the
fuel base cost of 22,100 (2015/16).
The taxable benefit applies for any fuel provided for personal use, so unless the employee
reimburses the company for the cost of any fuel used for private purposes, although part
reimbursement of private fuel does not reduce the fuel benefit value.

Example:
The owner of a company decides to provide himself with a company car, and chooses a petrol car
with CO2 emissions of 132g/km at a cost of 22,000 and with fuel provided for private use. The
value of his benefit in kind can be calculated as follows:
CO2 emissions of 132 100 = 32
32/5 = 6.4 per cent, which is rounded down to 6 per cent
6 + 15 = a benefit percentage of 21 per cent
List price (including any extras):
21 per cent of 22,000 gives a car benefit of 4,620
Fuel base cost:
21 per cent of 22,100 gives a car benefit of 4,641
Total benefit in kind: 9,621
This benefit would need to be included on the employees personal tax return every year and, as
such, will be taxed at the marginal rate. As a basic rate taxpayer, he will pay an additional 1,852
in tax every year. If he had dividends that took him up to, or above, the high rate threshold before
taking this additional benefit in kind into account, then he will need to pay an extra 2,084 in tax.
HMRC may wish to amend his tax code to allow them to collect the tax that is owed on the benefit in kind through his
salary, so for the purposes of this illustration the code would have been changed to I33L.

The business will also need to declare the company car on the employees P11d each year and pay employers National
Insurance Contributions at the rate of 13.8 per cent, totalling 1,278.

company cars are not a tax efficient in circumstances where the owner and
For the most part,
employee are one and the same, as this means that both the employees and employers taxes are
effectively paid by the same person.
For a company car to be a genuine tax efficiency, then it can be either in a case where the
employee is not a shareholder in the company providing the car, or if the car is particularly
environmentally friendly. For this reason, it is usually inadvisable for owner managers to have a
company car.

Accommodation

If an employee stays away from their home in the course of their duties, then they can claim the
costs of accommodation back from their employer, as long as they do have a permanent place of
residence.
There is no confirmed limit on the amount which can be claimed for accommodation, but HMRC
will expect every claim to be reasonable. This is usually easy to demonstrate, except in cases
where the nature of the accommodation means that it could be construed as a reward for the
employee as opposed to an expense, which is incurred wholly and exclusively for the purposes of
doing business.

Shankar Devarashetty FCCA

Oasis Accountants is a limited company registered in England and Wales No.8359050. Registered as auditors in the United
Kingdom by the Association of Chartered Certified Accountants. VAT no: 163 3407 26
 The full cost of hotel, guesthouse and bed and breakfast accommodation is allowable for
Corporation Tax purposes so long as they are not excessive.
If renting a furnished flat is a more cost effective way of providing accommodation for an
employee, then these costs are also allowable, so long as the standard of the furnished flat isnt of
a significantly higher standard than that of the employees normal residence. In the case where an
employees normal residence is of a particularly high standard, an equivalent flat may not be
allowable.
A short term lease on a rented flat should be taken out in the company name, and paid directly
from the company bank account where possible. The length of the lease should also be taken into
account when considering the 24 month rule Guidelines, as it may be considered as an
indication of how long an employee intends to be based on the same site.
There are situations which will not be allowable, these include:
If the employee is accompanied by their family this is considered non-business usage
If the choice of location is not work-related this is considered a non-business reason
If the standard of the location is unreasonably high as detailed above

Subsistence

If you are travelling to a temporary location for work purposes, then you may be able to claim for
the cost of lunch purchased en route or during your lunch break. These must be additional costs
which you would not have spent were you not at the temporary place of work.
Lunch usually takes the form of a pre-packed sandwich (or equivalent), a meal in a caf or canteen
and can include a non-alcoholic drink. However, you cannot claim the cost of ingredients to make
your own packed lunch, or the costs of a meal purchased the night before the trip to the
temporary location.
If staying away from home overnight due to work commitments, you can claim the cost of
breakfast and an evening meal. These must be reasonably priced and not to a standard which
would be beyond what you would normally have. You can claim a flat rate subsistence allowance
of 5 for each night, or 10 if you are overseas

For more information about what expenses you can claim as a contractor, please get in
touch with Your Dedicated Account Manager who will be happy to answer any of your
questions on his direct extension or on 020 3818 9530 or
email support@oasisaccountants.co.uk.

Shankar Devarashetty FCCA

Oasis Accountants is a limited company registered in England and Wales No.8359050. Registered as auditors in the United
Kingdom by the Association of Chartered Certified Accountants. VAT no: 163 3407 26