Festive season has officially begun. Between contracting, Christmas parties and gift shopping, the next couple of months will be very busy. So we’re giving you three tips to help get you smoothly through the holiday season.
Want to know some clever and easy ways to make your life easier as a contractor? Continue reading to find out which of the following tips you can use to your advantage this holiday season:
1. Claim your company Christmas party expenses to receive tax and NI exemptions
Get-togethers around the Christmas period can get pricey, but thankfully HMRC allows a tax and National Insurance exemption for certain company social events and parties that you provide – even if it is just for yourself as the sole employee of your company going out for a nice dinner.
There are certain criteria to meet if you wish to qualify for this exemption:
- The event is annual
- All employees can attend
- It doesn’t cost more than £150 per head
Obviously if you are the sole director and employee of your company, you can only claim for the cost of expenses applying to yourself. This may mean not having a party but rather a ‘Christmas meal’ out. There’s a chance that you will not need to report the Christmas ‘party’ expenses to HMRC, provided that all of the above criteria apply. For example, you can be exempt from reporting Christmas party expenses but not a quarterly social function.
What’s the best part?
If you have several annual events for your limited company, for example, a summer function and a Christmas party, the expense can still be exempt provided that the combined costs of the events are not over £150 per head. For instance, if your summer function cost the company £50 and the Christmas party £75, they will each be exempt.
The benefit is that you can pay for your limited company Christmas party from the business account and be totally exempt from tax and NI as long as the criteria are met.
2. Plan your holiday time accordingly
Taking holidays as a contractor is different compared to taking holidays as a permanent employee. If you want some extra time off around Christmas and New Year, and you are currently on a contract, there are two things to consider:
- Timing: booking off a holiday is fairly straightforward when you work outside IR35. Provided you know you can complete the work set out in your contract, you can take your holiday when and as you see fit. You simply need to inform your client when you won’t be in; as they are your client, not your “boss”, you don’t necessarily have to give a certain amount of notice. Do be considerate of their time, however don’t appear as though you are asking permission.If you work inside IR35, you may have to follow your client’s procedures in requesting time off as you would be within the realm of Supervision, Direction and Control.
- Pay: As a limited company contractor, you need to have funds to cover the period when you are off on holiday as you won’t be getting paid – so do consider this when planning your holidays.
If you work through an umbrella company, you will be given holiday pay based on how many hours you’ve worked to help cover your time off. This will either appear on your weekly or monthly payslip as holiday pay, or it will be accrued. All umbrella company employees are legally entitled to 28 days of paid holiday each year. However, you may still wish to put some funds aside for the Christmas period in case you are on a short contract, or will not be working many hours.
If you have questions about how an umbrella company works, contact Churchill Knight Umbrella on 01707 871622.
3. Tie up loose ends before you get too busy
As a contractor, you have a few obligations to yourself. You will thank yourself later if you get these tasks out of the way so you can focus on your work and enjoy all that this time of year has to offer.
Items such as submitting timesheets, claiming expenses, invoicing your clients and more are best completed as soon as you have the information you need. Try not to avoid tying up loose ends straight away, as it could result in payment delays from your client. If you use a contractor accountant or work through an umbrella company, simply ensure they have all the information they require to complete the administration for you.
A big task for limited company contractors this time of year is the Personal Tax Return. Once the festive season really gets underway, it’s hard to remember that this has to be done, and you may not find the time to get it done until after Christmas.
After Christmas, HMRC’s helplines will be inundated with traffic as thousands scramble to complete their 2018/19 Tax Returns by the 31st January deadline. It may be easiest to appoint an accountant to complete and submit your Personal Tax Return on your behalf.
Last tip – make sure you enjoy this festive season
Be prepared and proactive as a contractor. The festive season should be enjoyed, so use these tips to reduce any stress and time wasted.
Contact us at Churchill Knight & Associates Ltd if you would like any assistance with what we have mentioned here. Our service is designed to give you unlimited support whenever you need it, at any time of year.
