A company is usually required to complete a P11D form to claim approved expenses. Umbrella companies have a dispensation meaning that they don’t have to complete the P11D form for every single expense claim they deal with. The dispensation exists solely for the benefit of the umbrella company’s administration team, to cut down on paperwork.
The dispensation only applies to work-related expenses that qualify for full tax relief for example business travel expenses. There is no upper limit to the amount you can claim, but your expenses must be legitimate work expenses that have been approved by your Agency or Client and you must retain all receipts and proof of purchase for your records. If you are inspected by HMRC you will be expected to produce all relevant paperwork regarding your receipts otherwise you may be fined for underpayment of taxes or even fraud.
In the end, it is easy to see why so many people are signing up to umbrella companies. They offer similar take-home pay rates for most contractors or that they mean you won't ever have to do a lot of paperwork or admin. You can claim expenses and that you can be up and running instantly (and leave just as quickly). With an umbrella company, you are already paying PAYE and NIC's which means that you will be completely HMRC compliant.
With an umbrella company, your work will be hassle-free.