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Latest Article: Employment Intermediaries and Tax Relief for Travel and Subsistence
Posted by: Kam on Aug 26, 2015

In April our blog first highlighted this important issue. Here are a few more details as the proposed April 2016 gets nearer!!

The Government is consulting on proposals to ban tax relief on travel and subsistence expenses for contractors who are under the ‘supervision, direction or control of any person’ (SDC) from April 2016.

The measures will affect those who supply their labour via an intermediary. Typically this will affect agency workers and individuals who provide their services via a personal service company (PSC) or an Umbrella company.

There have been no updates since the March 2015 Budget, however, a consultation document was issued last month, asking for the views of interested parties before 30th September.

HMRC's proposals - summary

The temporary workplace travel rules allow temporary workers to obtain tax relief for their home to work travel provided that attendance at a workplace is for a temporary duration. The new proposal has the effect of treating a temporary workplace for workers under the SDC condition as a permanent workplace. The result of the change will be that the cost of home to work travel will be treated as ordinary commuting and therefore not allowable for tax relief.

For a contractor, if the SDC condition applies then there may also be an IR35 implication. Under these conditions tax relief on travel and subsistence expenses may not be allowable.

There will be no change to the rules for travel and subsistence relief on travel abroad, this includes where a worker is employed through an employment intermediary and the SDC condition would apply to the engagement.

Transfer of liability for tax - HMRC is exploring the following options

  1. It will be the engager’s responsibility to confirm with the employment intermediary whether the contracted worker will be under SDC. This places the burden on the engager and may make them liable to HMRC for any outstanding tax.
  2. The employment intermediary will remain responsible for any tax from misuse of travel and subsistence tax relief.

In conclusion, these proposals could result in a material increase in tax for contractors who travel a great deal as part of their work.

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