Written by Peter Allen MAAT, co-founder and Finance Director of Buzz Accounting, with more than 20 years in accountancy.
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No, and this is one of the most expensive misunderstandings in the trades. Travelling expenses and subsistence are included in the payment the deduction is taken from. Fuel is excluded from the deduction base except fuel for travelling, which means the diesel that gets the van to site stays in. Showing mileage, hotels or food as a separate expense recharge line on your invoice does not change the treatment. So a £10,000 labour invoice with £400 of travel recharged suffers a deduction on the full £10,400 of labour and travel. At 20% the deduction is £2,080.
These come out of the payment before the deduction is worked out:
These stay inside it:
Nothing in the process warns you. The return still files, the statement still issues, the payment still arrives. A business covering a wide patch can have 20% taken off a mileage line every month for years, and the first sign of it is usually somebody adding up the deduction column and asking why it is so close to the whole invoice.
This is correct under the rules, so there is nothing to reclaim. Travel is inside the deduction base by design. The money comes back through the tax return like any other deduction. Until then, a business budgeting on net receipts is funding its own travel a year in advance.
You must have directly incurred the cost. Where the contractor buys the materials and recharges them, you have not directly incurred anything and no reduction is due. Buying materials on your own account and keeping the receipts reduces the deduction. That is decided when you agree the contract.
This question is part of CIS for subcontractors, which covers the whole area.
Send us three months of payment and deduction statements. We will tell you what is wrong, what it is costing, and whether gross payment status would fix it.