This week one of our agencies asked us about paying a contractor for expenses whilst on a placement. The contractor had asked if they could be paid for their time worked via the limited company but have their approved expenses sent to their personal account.
We explained to the agency that the contracts in place with the contractor engaged them to pay funds to the limited company and to make a payment to the contractor directly could be seen as a tax free payment.
We advised the agency it was best to pay all monies to the limited company and that there should be no detrimental effect to the contractor if he provided the expenses to their accountant as they would treat them as reimbursement of expenses.
We also explained that, due to the new HMRC reporting legislation, if they did make the payment directly for the expenses that this may be highlighted and lead to an investigation.
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