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Contractors must keep expense receipts for 5 years

06 September, 2010

Some Umbrella Companies offer dispensation agreements. Please don't think this means you don't have to maintain accurate expense receipts and records. These dispensation agreements with the HMRC reduce the amount of paperwork required to be completed by the Umbrella Company; they do not guarantee you won't be inspected.

No contractor can claim for an un-receipted business expense that has not genuinely been incurred and receipted. While the Umbrella Company may be able to submit some expenses with receipts, the HMRC requires that the contractor keep all receipts for 5 years. The liability of any underpaid tax remains with the contractor and if found out by the HMRC, penalties will be incurred.
The following guideline will assist contractors in submitting expense claims:

  • Keep a diary of your mileage when travelling between home and workplace
  • All train, plane, tube and taxi receipts, if the contract is outside normal travelling zone
  • All accommodation when the contract demands staying away from home
  • Personal Incident Expenditure - PIE allows £5 for miscellaneous items, when staying overnight
  • Any needs specific to the contract, e.g. safety or computer equipment
  • Telephone, internet and other business related communication costs
  • Daily subsistence
  • Bank charges and interest
  • Professional memberships and other subscription fees, where related to business and the actual contract
  • Professional Indemnity insurance
  • Pension scheme, where paid by the company to a HMRC approved scheme
  • VAT on expenses

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