{"id":1300732,"date":"2026-10-23T14:48:58","date_gmt":"2026-10-23T13:48:58","guid":{"rendered":"https:\/\/sapphire.clients.thisismc2.com\/contracting\/?post_type=insights&amp;p=1300706"},"modified":"2026-10-23T14:48:58","modified_gmt":"2026-10-23T13:48:58","slug":"umbrella-expenses-what-you-can-and-cant-claim","status":"publish","type":"insights","link":"https:\/\/wearesapphire.co.uk\/contracting\/resources\/insights\/umbrella-expenses-what-you-can-and-cant-claim\/","title":{"rendered":"Umbrella expenses: what you can and can&#8217;t claim"},"content":{"rendered":"<p><b>Quick facts<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">since April 2016, most umbrella contractors cannot claim travel and subsistence as tax-free expenses<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">the key test is Supervision, Direction or Control (SDC) &#8211; if it applies to you, home-to-work travel and subsistence relief is gone<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">you may still claim some genuine business expenses, but the list is narrower than many providers suggest<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">non-compliant expense claims are a risk to you, not just your umbrella company &#8211; HMRC can recover unpaid tax directly from workers<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400\">Expenses are one of the most misunderstood parts of working through an umbrella company. There is still a significant amount of information circulating &#8211; including from some providers &#8211; that is outdated, misleading or, in a small number of cases, an active attempt to inflate take-home pay through arrangements that don&#8217;t hold up to scrutiny.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">This guide explains what the rules actually are, why they changed, and what you can and can&#8217;t claim if you&#8217;re working through an umbrella.<\/span><\/p>\n<h2><b>What changed in April 2016<\/b><\/h2>\n<p><span style=\"font-weight: 400\">Before 6 April 2016, umbrella contractors could treat travel between home and a temporary workplace, plus subsistence at that workplace, as tax-exempt expenses. For many contractors, this meant a meaningful reduction in taxable income &#8211; and umbrella companies offered it as a selling point.<\/span><\/p>\n<p><span style=\"font-weight: 400\">HMRC closed that route. The government introduced legislation that removed travel and subsistence relief for workers subject to Supervision, Direction or Control (SDC) from their end client or the agency placing them. The reasoning was that HMRC determined the arrangement was being used to reduce workers&#8217; income tax bills and National Insurance contributions (NICs) in a way that did not reflect how those workers were actually engaged. Where someone&#8217;s working life looks like employment, they&#8217;re told what to do, how to do it and when, and HMRC&#8217;s view is that their expenses should be treated accordingly.<\/span><\/p>\n<p><span style=\"font-weight: 400\">The result is that the vast majority of umbrella contractors can no longer claim home-to-work travel or subsistence as tax-free expenses. This isn&#8217;t a grey area or a judgment call; it&#8217;s the law, and it&#8217;s been consistently enforced since 2016.<\/span><\/p>\n<h2><b>What you can still claim<\/b><\/h2>\n<p><span style=\"font-weight: 400\">Not everything is off the table. Some genuine business expenses remain claimable, provided you have receipts and your umbrella company approves them within HMRC&#8217;s rules. These include:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">equipment and tools specific to your work that aren&#8217;t provided by the client &#8211; though the rules here are narrow and personal purchases rarely qualify<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">professional subscriptions and memberships relevant to your current assignment or profession, where HMRC has approved the body in question<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">training costs directly relevant to your current assignment &#8211; the rules are tight and courses that improve your skills beyond the scope of your current contract generally won&#8217;t qualify<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">business travel that does not constitute ordinary commuting &#8211; for example, travelling to a site that isn&#8217;t your regular workplace, or attending a client meeting at a different location from where you normally work<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400\">None of these categories are straightforward. If you&#8217;re uncertain whether a specific expense qualifies, check before you submit it, not after. Sapphire&#8217;s team can help you work through whether something is claimable.<\/span><\/p>\n<h2><b>The SDC test explained<\/b><\/h2>\n<p><span style=\"font-weight: 400\">Supervision, Direction and Control (SDC) is the legal test that determines whether the 2016 rules apply to you.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Supervision means someone oversees your work to check it&#8217;s being done correctly and to standard<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Direction means someone tells you what work to do or how to do it<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Control means someone has the power to decide where, when and how you work<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400\">In practice, if you&#8217;re placed by a recruitment agency and working on a client&#8217;s site alongside their staff, reporting to a client manager and working within their processes, you will almost certainly meet at least one of these criteria. That&#8217;s not a criticism of how you work &#8211; it&#8217;s simply an accurate description of how most umbrella contractor assignments operate.<\/span><\/p>\n<p><span style=\"font-weight: 400\">HMRC&#8217;s starting assumption is that SDC applies unless there&#8217;s clear evidence otherwise. The burden of showing you&#8217;re not subject to SDC falls on the umbrella company &#8211; and in most cases, it can&#8217;t be demonstrated. This is why compliant umbrella companies don&#8217;t process travel and subsistence as tax-free expenses for the vast majority of contractors.<\/span><\/p>\n<p><span style=\"font-weight: 400\">If you believe your assignment is genuinely free of SDC, speak to Sapphire before making any claims based on that assumption.<\/span><\/p>\n<h2><b>What happens if you claim expenses you&#8217;re not entitled to<\/b><\/h2>\n<p><span style=\"font-weight: 400\">This is where the stakes get real. The risk from a non-compliant expense claim doesn&#8217;t sit only with the umbrella company &#8211; it sits with you.<\/span><\/p>\n<p><span style=\"font-weight: 400\">HMRC has the power to investigate individual workers and recover unpaid income tax and NICs where expenses have been processed incorrectly. If you&#8217;ve been claiming travel and subsistence since 2016 through an umbrella that told you it was fine, you may have an underpaid tax liability. That&#8217;s a debt you&#8217;d need to settle, along with any interest and potential penalties.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Non-compliant expense arrangements are also classed as tax avoidance. HMRC takes this seriously. In 2025, HMRC published Spotlight 71, warning agency workers and contractors about umbrella schemes that move workers between companies without proper disclosure. This is a mechanism sometimes used to obscure non-compliant arrangements, including inflated expense processing. The guidance sets out specific warning signs workers should look for and makes clear that HMRC will pursue the tax owed regardless of whether the worker understood what was happening.<\/span><\/p>\n<p><span style=\"font-weight: 400\">If you&#8217;ve received a promotion promising higher take-home pay through expenses that sound too good to be true, it&#8217;s worth checking what sits behind that figure before you sign anything.<\/span><\/p>\n<h2><b>Red flags to watch for<\/b><\/h2>\n<p><span style=\"font-weight: 400\">Not all umbrella companies operate compliantly, and the promises used to attract contractors can be difficult to assess without knowing the rules. Here are the clearest warning signs:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">a provider promises you a substantially higher take-home percentage than other compliant umbrellas &#8211; without a clear, transparent explanation of how<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">travel and subsistence expenses are included in your pay calculations without any SDC assessment being carried out<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">your expense claims include regular home-to-workplace travel or daily subsistence at your usual site<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">payments arrive in multiple parts, with some described as expenses, loans or advances rather than salary<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">you&#8217;re moved to a new payroll system or umbrella company at short notice with little paperwork or explanation<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400\">Compliant umbrella companies process expenses within HMRC&#8217;s rules. The list of claimable expenses is limited, but what is processed is accurate, defensible and won&#8217;t create a problem for you further down the line.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Sapphire has held FCSA (Freelancer and Contractor Services Association) accreditation for eight consecutive years. Compliance with HMRC&#8217;s rules on expenses is part of what that accreditation covers, and it&#8217;s independently audited. Sapphire operates within the rules &#8211; which means we don&#8217;t process claims we can&#8217;t support.<\/span><\/p>\n<h2><b>How to claim expenses at Sapphire<\/b><\/h2>\n<p><span style=\"font-weight: 400\">If you have a legitimate expense to claim, the process is straightforward.<\/span><\/p>\n<p><span style=\"font-weight: 400\">In general, when submitting any expense claim:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">keep all receipts, including digital copies<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">make sure the expense is genuinely work-related and not already covered by the client<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">check that the category is one Sapphire can accept before submitting<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">submit by the relevant payroll deadline to ensure it&#8217;s processed in time<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400\">If you&#8217;re not sure whether something qualifies, don&#8217;t guess. Ask first. Our team is available by phone, email or WhatsApp and can usually give you a straightforward answer on whether an expense claim makes sense before you submit it.<\/span><\/p>\n<h2><b>Getting expenses right protects you<\/b><\/h2>\n<p><span style=\"font-weight: 400\">Claiming what you&#8217;re entitled to is straightforward and worth doing. Claiming what you&#8217;re not entitled to, even if a provider tells you it&#8217;s fine, creates a risk that stays with you long after the assignment ends.<\/span><\/p>\n<p><span style=\"font-weight: 400\">If you&#8217;re unsure about any element of your expenses, ask before you submit. The rules since 2016 are clear, HMRC enforces them consistently, and compliant umbrella companies operate within them. At Sapphire, we&#8217;d rather spend two minutes answering your question than have you face an investigation down the line.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Have a question about your expenses? Contact the Sapphire team by phone, email or WhatsApp and we&#8217;ll give you a straight answer before you submit anything.<\/span><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Quick facts since April 2016, most umbrella contractors cannot claim travel and subsistence as tax-free expenses the key&#8230;<\/p>\n","protected":false},"author":2,"featured_media":789,"menu_order":0,"template":"","class_list":["post-1300732","insights","type-insights","status-publish","has-post-thumbnail","hentry"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Umbrella expenses: what you can and can&#039;t claim - Sapphire Contracting<\/title>\n<meta name=\"description\" content=\"Understand which expenses umbrella contractors can claim, how SDC rules affect travel and subsistence, and the red flags to avoid.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/wearesapphire.co.uk\/contracting\/resources\/insights\/umbrella-expenses-what-you-can-and-cant-claim\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Umbrella expenses: what you can and can&#039;t claim - 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