How does unbilled time work?
inniAccounts tracks unbilled time from your time sheets, helping to ensure you always get paid the right amount for your services and can raise invoices in seconds.
With a contract set up your client will appear in the time sheets of the Quick Entry area. This will allow you to record the time spent working for clients which in turn allows you to raise an invoice by simply adding unbilled time from your time sheets. Using time sheets helps ensure complete records and will mean you can create and send an invoice to your client in seconds.
Hours or days?
What you enter in your time sheet depends on what rate you have set in your contract settings. If you have set up a day rate in your contract, enter 1 for a chargeable day or 0.5 for a half day in your time sheet.
Unbilled time
When you click the button to create a new invoice, your clients will be shown along with the unbilled time from your time sheets. It’s an easy way to quickly see what work you still need to invoice your clients for.
Removing unbilled time
When recording hours or days worked in time-sheets, your time will remain unbilled until you’ve ‘added billable time’ to a new invoice. Once added to an invoice, your unbilled hours or days will reduce to reflect that you’ve created an invoice for that period of services.
If you’ve raised an invoice by adding a manual line for professional services and not applied unbilled time to an invoice for that period, the time worked that you recorded in your time-sheets will still show and be tracked as unbilled. You have two options to resolve this:
- If you’ve not been paid for the invoice you can edit it by removing the manual line for professional services and replace it using the add billable time option. Always check to total amount on the invoice is unchanged before saving.
- If you cannot edit the invoice, for example if you have marked it as paid in your bookkeeping, you’ll need to remove the hours from your time sheet for the period invoiced. Simply go to the Quick Entry area, find the weeks timesheet and set the hours / days worked to zero.
What is the 24 month / 2 year rule for travel expenses?
The 24 month rule allows travelling expenses to be claimed for commuting from your home to your client’s workplace; as long as it meets the criteria as a temporary workplace.
Independent professionals commuting to their client’s site must comply with HMRC’s temporary workplace rules to be able to claim travel expenses.
‘A workplace is a temporary workplace if an employee goes there only to perform a task of limited duration or for a temporary purpose.’
HMRC state that if a period of continuous work lasts for more than 24 months and is performed ‘to a significant extent at that place’ (i.e. 40% or more of your working time is spent there) – the workplace is permanent and travel expenses cannot be claimed.
So, if you’re spending more than 40% of your time at a client’s site, you can no longer claim expenses after 24 months. This rule applies from the start of your service onwards; it does not reset if there’s a break at any point in your service.
A workplace stops being temporary as soon as you know you’ll be working on-site for over 24 months (not after this time has elapsed). For example, if you’ve worked for 15 months at a client’s site and then win a contract extension for a further 12 months, you would need to stop claiming expenses as soon as you knew about the extension; rather than after 24 months have passed.
Changing workplace location
Changing location or even working for a separate client does not necessarily negate the 24 month rule. HMRC have provided this example, which details an IT contractor working for three separate clients in the City of London; for over 24 months and to a significant extent. Despite working in separate workplaces, as their travel from home to work is broadly the same every day, there’s no substantial change to the commute, so these workplaces are all classed as the same permanent workplace. As a rule of thumb, there has to be a significant change, either to your commute or the cost, to qualify as a change of workplace.
If you are working compliantly with IR35 than the 24 month rule will not directly impact your IR35 status. You can learn more about IR35 here.
What are the HMRC approved mileage rates?
Individuals can claim from a company HMRC approved mileage rates when using a personal vehicle for business purposes.
When using a personal vehicle for business purposes, the employer would normally reimburse the employee for the cost of the journey using the HMRC Mileage Approved Rates (MAPS) below.
To calculate the value of the expense claim, simply multiply the number of miles by the appropriate rate. For example, a 100 mile journey would be 100 x 45p = £45.00 assuming the cumulative mileage for the tax year was below 10,000.
| First 10,000 miles in year | Additional miles | |
|---|---|---|
| Cars and vans | 45p | 25p |
| Motor cycles | 24p | 24p |
| Bicycles | 20p | 20p |
When you make an entry into your mileage log, the software keeps track of your miles to date for the tax year and applies the correct rate. When your payslip is created, any mileage that you need to be reimbursed for will automatically be added to your payslip.
When using these rates there will be no additional tax to pay – in the example above an extra £45.00 would be on the pay slip with no extra Income Tax or National Insurance deductions.
You must account for your business mileage throughout the tax year using your own vehicles by grouping the same type together, e.g. all cars or all motorcycles. This means if you change your car part way through the tax year you do not start again with the ‘first 10,000 miles’ for that vehicle.
Sticking to the approved mileage rates
The mileage rates and hence the amount you can receive tax-free is the maximum relief you are entitled to in any tax year. HMRC do not allow you any additional relief if the actual expenses you incur exceed what you receive using these rates.
All the expenses associated with car ownership are taken into account by HMRC including interest payments, business insurance, depreciation and other payments you may have to make on your car. If your company pays you more that the allowances then the excess will be treated as taxable income for yourself and additional tax will become due.
Passengers
If you carry a fellow employee during business travel you can claim an additional 5p per mile provided the journey is specifically for carrying passengers. You can record this in your mileage log by making an additional entry for the journey and selecting the ‘passenger’ option in the menu.
Can I claim for fuel as well as mileage?
Mileage rates are designed to cover both the running costs and fuel for your vehicle. You cannot claim for fuel as well as a mileage claim.
Can I repay my personal expenses without using payroll?
Yes. If you prefer to repay your expenses manually we can arrange this for you. Please see this guide.
Do I have to pay tax on expenses?
If the expenses are wholly and exclusively for business purposes then you are unlikely to pay tax on the expense.
Common exceptions include: personal expenses and benefits (e.g. gym memberships or healthcare); business entertainment; penalties and fines.
Do I need to retain expense receipts?
Yes, you must keep receipts of your expenses for six years.
You can keep electronic copies of receipts instead of the originals if you prefer. It is important to ensure that the scans taken are legible, complete and that you keep the data safe and backed up. If for any reason you were to loose your data and HMRC requested evidence, you could be landed with an unexpected tax bill if you can’t provide the information.
Why should I claim mileage?
If you’re travelling to and from a temporary place of work (for example, to a client’s office) using your personal vehicle you can claim for the mileage. HMRC publish a fixed rate for mileage which you can claim without having to pay tax – for a car this is 45p per mile for the first 10,000 miles per year, and 25p per mile after this. The mileage allowance is designed to cover the car’s running costs and the fuel costs: you cannot claim for the fuel as well as mileage.
Mileage claims soon add up: if you made a 20 mile round trip to a client’s site three times per week you’d clock up 2,880 miles per year – that’s £1,296 towards the running costs of your car, tax-free.
You can also claim for parking and congestion charges (but not speeding fines or parking tickets). It’s also possible to claim for journeys made by motorbike and bicycle, at reduced rates.
Why are expenses important?
It’s likely that you’ll incur expenses whilst running your limited company – for example travel and hotel stays, IT equipment, office furniture and stationery, mobile phones, etc. HMRC allows you to claim these expenses from your company, and you do this before paying tax – therefore reducing your overall tax bill.
In order to claim an expense it needs to be wholly and exclusively for the purposes of your business – meaning you can’t claim for personal expenses.
Can I claim expenses before my company was formed?
When starting a business you may have incurred pre-trading expenses that you paid for using your own money. If the expenses were solely for use within your new business then yes, in most cases you may claim for the expenses when your new business starts trading.
When you record your pre-trading expenses in inniAccounts software, you’ll need to set the date of the expense as the incorporation date of your company. This is because all your transactions must be within an accounting period, i.e. between your incorporation date and your company financial year end. We recommend that in the description you enter the actual date the expense was incurred along with a description of the expense.
Typical expenses that you may incur before your company was incorporated could include:
- Purchase of equipment, i.e. laptop
- Insurances
- Advertising
- Domain names & hosting
- Stationery
- Professional advice
- Phone calls
- Travel costs (including mileage allowances)
Claiming for the cost of training courses prior to trading however is not allowable.
There are a few points that you’ll need to be mindful of. Firstly, for corporation tax purposes you’re officially allowed to reclaim expenses from the last seven years before trading. For VAT purposes however, it’s just six months. With all cases regarding expenses it’s best to take a pragmatic view.
With this in mind, we recommend that you only claim for items in the six months preceding the launch of your new business. When claiming these expenses you need to be confident that you’ve purchased the items specifically and wholly for your new business. For example, you shouldn’t claim for equipment you have purchased originally for hobby purposes which you’ve then later decided use in your business. As always, make sure you keep good records of your expenses, including the receipts.
So in conclusion: yes, you can claim for expenses before your business was formed. Be realistic and honest about what you’re claiming and if the claims are large or complex then do have a chat with your account manager.
Can I track time using hourly & day rates?
Yes, inniAccounts supports both daily or hourly rates. To use a daily rate use decimals in the time sheet – e.g. for quarter of a day enter 0.25. You’ll need to set your rate in your contract settings.
Do I have to use inniAccounts’ time tracking?
It’s not mandatory to use inniAccounts’ time tracking features – you can manually create invoices without having any time sheet records.
The benefit however using the built in time tracking is it helps ensure you invoice your clients for all your billable time. It helps you to also see what time is unbilled and ready for you to invoice.