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Outsourcing Some of Your Workload

Can I claim?

Yes.

Conditions

This kind of thing would fall under ‘business related service fees’. When you find yourself in a position where you are subcontracting, that is ‘outsourcing’, project specific work then you are said to be subcontracting help in a professional business endeavour.

The actual price of the product/service, or its perceived market value, is seen as disposal proceeds for tax purposes.

Any chargeable work, outsourced or not, is deemed as a product sale - and sales are taxable. Therefore, if you acquire a business related service its expenditure is deductible.

On SimpleTax

Under your self-employed expenses, select "Costs of Goods Sold" and then "Project Specific Subcontractors".

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More Information

However, this isn’t normally a concern in freelancing circles because the assets being transferred (services, products R&D etc) usually have little ‘second hand’ value attached to them.

The question that the freelancer would need to ask themselves, is whether or not the product or service being transferred is of significant value, or amounts to a significant sum over time, in terms of the amount of VAT that the product or service would attract. 

To conclude, outsourced work is a transfer (a sale) of a service to another provider. Services and products normally attract VAT, and the freelancer is accountable for this - but is also able to claim a tax relief.

Research and development, as another example, is a specialist process; and one that you may not able to perform yourself. By outsourcing this you are helping to ensure the survival of your business, and so are eligible for tax relief concerning the total cost of such an endeavour.

 

 

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