Travel & Subsistence Expenses

LEGISLATION UPDATE: Please note Legislation changes may restrict contractors claiming Travel & Subsistence expenses unless they can prove that they are not under the Supervision, Direction and Control (or the right thereof) of the end client.
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All umbrella companies state that their employees can claim travel and subsistence (meals) expenses but can they? Only if they have an over-arching contract of employment in place. And only if the contractor intends to work on more than one assignment whilst they are in their employment.

Travel and subsistence can only be claimed if the contractor is travelling to a temporary workplace, as defined by HMRC. An over-arching contract establishes continuous employment for the individual working on a series of assignments at temporary workplaces. But, if they only have one assignment, it will automatically be considered a permanent workplace. At this point travel and subsistence expenses won’t be allowable.

So then, what’s an over-arching contract?

Umbrella company workers have to be engaged under a contract of employment. In order for an overarching contract to be a contract of employment there must be mutuality of obligations during the gaps between assignments. The mutual obligations during the gaps must be obligations which relate to the provision of payment for work personally performed by the worker. Provided that exists and the engager exercises a sufficient degree of control over the worker and further that other terms and conditions are consistent with the contract being an employment contract, it will be an overarching employment contract.

Mutuality of Obligation (MOO)

‘Mutuality of obligation’ refers to the fact that both parties signing the contract must have obligations to one another; an obligation by the contractor to accept and do work and an obligation on the employer to pay a retainer during such periods when work was not offered.

What questions should you be asking as part of your due diligence process?

Does the contract have a provision for payment in the gaps between assignments?
The legal position is that; “In order for an overarching contract to be a contract of employment there must be mutuality of obligations during the gaps between assignments; and the mutual obligations during the gaps must be obligations which relate to the provision of payment for work personally performed by the worker”.

Does the contract guarantee a minimum of 336 hours of work per 12 month period?

Does the contract state that the worker is obliged to do the work personally?

Without the inclusion of these clauses the contract could not to be considered to be over-arching. Therefore the umbrella company would not be permitted to allow travel and subsistence expense claims from its workers.