Invoicing & Per Diems

[rostraqueen]

Hi Everyone

 

Just wondering where you all stand on whether you invoice for per diems and subsistence or not?

I have been including them as a separate item on invoices, but a colleague mentioned that he doesn't invoice for them because it affects his tax..

I can see how if I claimed them as income and didn't use the whole amount for my expenses then I would end up paying tax on what was left, but as I am claiming some expenses which the per diems/subsistence is designed to cover surely I should also declare the per diems/subsistence...?

 

Any thoughts?

 

Thanks!

[kerry davies]

Bit of a grey area since per diems, in HMRC terms, are for employees while self-employed people can claim expenses on their self-assessment. I never itemised such things since they can lead to "day rates" which are a definite no-no for the truly self-employed.

 

I appreciate that theatre practice and custom is different but that makes it no less legally dubious. No other "tradesman" would even think of itemising "lunch" on an invoice, would they? I have added hotel, meals bought for crew, taxi and train receipts as separate items, never per diems.

[itiba]

Whether you invoice for them or not they still form part of your taxable income. Whether you declare them or not is another matter ;)

[Junior8]

I agree with Kerry, just charge for the job.

[paulears]

I add subsistence to some invoices where it is paid, and it never seems a problem. The rules keep changing. This year in panto, those who are self-employed and had a valid URN got their pay with no deduction for tax - BUT - these same people had their travel taxed. If the production company organised their travel and paid for it, it was not mentioned, but some booked their own flights or ferry crossings and these were itemised on a separate form and these payments taxed at the 20% rate. Me, on the other hand invoiced the total job in full, including subsistence, and travel and then the VAT on top and got it paid on full. No idea why this was different - my contract needed an invoice the other cast and production people did not invoice, just got paid.

[w/robe]

I itemise as little as possible, no dates, no number of days and no per diems. My general line is 'To act as Wardrobe Supervisor for 'Blue Room - the musical' total fee £XXXX.XX

I've never had either a producer, accounts department or the tax man question them.

[paulears]

I have one client who consistently itemises the jobs into rather silly things that really should not go on self-employed peoples invoices.

 

He sends me an email that says things like please invoice me as follows: Wages £250, Subs (which in his case means a payment up front, not subsistence) £50 fuel @ 26p/mile (half the accepted value as it's my choice to travel separately) and then VAT on the top. In his case, I repeatedly change it to a total like w/robe's above - he never queries it. Over the years his books must show quite a few people being paid wages. I've tried to explain that he'd have a real problem convincing HMRC he wasn't an employer as he uses the word wages - but he's convinced he is doing it right.

 

He also does work for me and over the year, I've noticed that the amount he invoices me for, is roughly the same as I invoice him for for. Rather O/T, but how would it work if we just didn't invoice each other at all. It would lower our turnover by around six grand each. Is this good or bad, I can't quite get my head around it?

[rostraqueen]

So... legally I should claim per diems & subsistence in my self assessment as taxable income, but in terms of invoicing I should ask the client/employer whether they want an invoice for it or not? Or is there no right or wrong answer?

For one job I have coming up which pays per diems I am unlikely to spend it all on my expenses - of course it would work out better for me not to put it down as income and not to offset my expenses against tax as I would end up with a little bit of untaxed income at the end. But don't want to do it that way if it's illegal of course!

Also, back in August, I did a job where I received a sum of money designed to cover expenses only but it didn't even cover my expenses and I actually made a small loss - should I include that fee as income?

 

Thanks for your replies so far!

[w/robe]

I repeatedly change it to a total like w/robe's above

I didn't know you did costume!

 

I once swapped doing some sewing on a set for a carpenter for him rehanging some doors in my house.

I would think Paul, so long as you make sure that neither of you take the piss, you could just help each other out from time to time without exchanging invoices or cash and therefore paying no tax.

[itiba]

Well it doesn't really matter if you invoice for it or not - any money* received as consideration for your services should be included as part of your self employed turnover (this includes cash).

 

Thereafter any payments you make exclusively and wholly for the purpose of carrying out your business such as travel and hotels (but not lunch) should be recorded as a business expense.

 

Your turnover minus your expenses** is your taxable income. Simples

 

 

 

(*Also includes benefits-in-kind so if they bought you lunch for instance but that's a sticky area for some people and I doubt anyone in the industry follows this rule)

(**I didn't include purchase of tools which as capital expenses form part of your annual investment allowance but getting complicated enough as it is)

[Stuart91]

He also does work for me and over the year, I've noticed that the amount he invoices me for, is roughly the same as I invoice him for for. Rather O/T, but how would it work if we just didn't invoice each other at all. It would lower our turnover by around six grand each. Is this good or bad, I can't quite get my head around it?

 

From your posts above, Paul, it appears that you are VAT registered. If the other guy isn't, then that changes things compared to the way itiba outlined.

[itiba]

I was replying to the OP actually instead of Paul. I suppose the size of his turnover doesn't affect Paul as he is already VAT registered but might give a bit more of a buffer to the other guy. You'd need a lot of trust though.

[Junior8]

So... legally I should claim per diems & subsistence in my self assessment as taxable income, but in terms of invoicing I should ask the client/employer whether they want an invoice for it or not? Or is there no right or wrong answer?

For one job I have coming up which pays per diems I am unlikely to spend it all on my expenses - of course it would work out better for me not to put it down as income and not to offset my expenses against tax as I would end up with a little bit of untaxed income at the end. But don't want to do it that way if it's illegal of course!

Also, back in August, I did a job where I received a sum of money designed to cover expenses only but it didn't even cover my expenses and I actually made a small loss - should I include that fee as income?

 

Thanks for your replies so far!

 

You need to be very careful how you invoice for anything that might affect your self-employed status. In this respect itiba above is correct. You see it is perfectly possible that a generous client could give you an allowance for subsistence that would be immediately struck out if declared as a business expense since these have to be solely concerned with carrying out your business. In the case of the upcoming job just treat it all as income and only set against it allowable expenses. In the case of the August job declare it as income but again set against it any allowable expenses. For the self employed most subsistence and quite a lot of travel is non-allowable see here http://www.hmrc.gov.uk/manuals/bimmanual/bim47705.htm There was a debate on here some time ago about the definition of itinerant traders and whether it applied to self-employed contractors in our sector without reaching any firm conclusion. However a contact of mine who operates outdoor markets had a tax inspection and was firmly told that he could not claim for travel from his home base to the market venue since the latter was his place of work - take that for what it is worth as an indication of the approach that might be taken.

 

 

 

 

 

[ontoprigger]

If you receive it as cash and dont declare it be very careful about the receipts you submit. Quite a few years back when pds were always handed out as cash at the start of the week I used to end up with surplus cash and didn't need to go to the bank to get cash out. When I was audited by the inland revenue they asked where all the cashed used to pay for declared expenses had come from as I hadn't withdrawn any cash from the bank that year. I had another £7500 added to my income even though I had not had that much in pds plus a £1500 fine for non declared income. A few years later a lot more production companies started requiring pds to be invoiced. Now its much clearer on pds, if you get them they are part of your taxable income, I found out the hard way in times when it was just free money you were given each week as part of the tour, and nobody real knew you had to declare it, it was just one of the perk of touring wasn't it.....

[splodge360]

I itemise as little as possible, no dates, no number of days and no per diems. My general line is 'To act as Wardrobe Supervisor for 'Blue Room - the musical' total fee £XXXX.XX

I've never had either a producer, accounts department or the tax man question them.

 

I'd be up for buying tickets to see the show " blue-room, the musical"!