Contractor Doctor: Why won’t my umbrella let me claim expenses during my notice?

Dear Contractor Doctor,

I am an IT contractor using an umbrella company as my trading vehicle. I have recently been offered and accepted a full-time permanent role with a new employer.

My contractual notice period with my client is four weeks. When I informed my umbrella company that I was leaving, they said I would no longer be able to claim for travel and subsistence whilst working at my end-user client’s offices during the last four weeks of my notice period.

Why won’t my umbrella company let me claim expenses during my notice period?

Thanks

Carmen

Contractor Doctor says:

IT contractor Carmen has fallen foul of HMRC’s fixed-term appointments rules and the umbrella company is correctly fulfilling its duty to keep its employees compliant, according to Rob Crossland, Chief Executive of contractor umbrella solutions provider Parasol.

“As soon as a contractor knows that the assignment will be their last, the umbrella company is correct to prevent contractors from claiming expenses,” explains Crossland. “The rules say that the workplace – the client’s offices in this case – become permanent when the assignment is expected to last for the rest of the period of employment.”

Because the contractor is leaving for a new full-time position, the normal 24-month expenses rule is over-ridden in those last four weeks, as the end of the assignment is known and the client’s offices are re-classified as a permanent workplace.

Difficult to enforce

But Crossland says these rules can be difficult to enforce, because the umbrella company and the contractor always hope that any given assignment is not the last one. He says: “If we’re told by a contractor that their current assignment is the last one with us, we would have no option but to prevent them from claiming expenses. It’s the same principle as for the 24 month rule.”

Carmen's assignment is coming to an end because she has handed in her notice to her umbrella company employer, so no expenses can legitimately be claimed for those last four weeks

Rob Crossland, Parasol

Crossland uses the 24-month rule as an example of how the logic of HMRC’s rules works: “The key point is that no expenses can be claimed from the point when the contractor and employer, the umbrella company in this case, know the assignment will exceed 24 months, not when it actually does.

“Carmen’s assignment is coming to an end because she has handed in her notice to her umbrella company employer, so no expenses can legitimately be claimed for those last four weeks.”

Good luck with your contracting!

Contractor Doctor

Published: Tuesday, May 18, 2010

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