Changes to Travel and Subsistence Expenses

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Following a review of Travel and Subsistence (T&S) claims the government will introduce new legislation from April 2016 to remove tax relief for travel and subsistence for workers paid via an employment intermediary (i.e. via a Recruitment Business, Umbrella Company or Personal Service Company).

What are the Changes?

The draft finance bill announced in December 2015 confirmed;

  • Contractors working under Supervision, Direction or Control (SDC), or the right of SDC, fall within the legislation
  • It is assumed that all workers are subject to SDC by default and it is up to the intermediary to prove otherwise
  • That each assignment will be considered as a permanent place of work for the purpose of expenses.

What do the Changes Mean?

A Contractor Working on Single Site for an Assignment working under SDC

Therefore a contractor working under SDC at one site for an assignment will no longer be able to claim T&S expenses.

A Contractor Working on Single Site for an Assignment not working under SDC

A contractor not working under SDC at one site for an assignment will be able to claim T&S expenses.

A Contractor Working on Multiple Sites for an Assignment working under SDC

A contractor working under SDC at one site for an assignment will no longer be able to claim T&S expenses when travelling to the main site, but if they were to visit a second side which is not considered part of his normal duties he would be able to claim T&S expenses to this temporary place of work.

Limited Company Subcontractors

Contractors working through their own Limited Company or PSC will only be able to claim expenses if they fall outside of IR35.

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The SDC Test

HMRC have advised they are to provide detailed examples to assist in the SDC text.

Penalties

Where expenses are processed and the HMRC deems the contractor to be working under SDC the HMRC will issue a bill for the unpaid tax and NI due, a 50% fine along with interest. The fine will be the responsibility not only on the companies involved in the chain (right up to the end client) but also any individual the HMRC deems as being directly involved at the avoidance of tax.

The Future

The changes are expected to see an influx in the amount of contractors working through a Limited Company for higher earners and an increase of the traditional PAYE payroll. Both of which will add increased administrative burden on the Recruitment Agency moving away from the Umbrella PAYE model.

CE Back Office specialise in offering outsourced PAYE payroll bureau, Limited Company payments and invoicing facility for Recruitment Businesses.

Sign up to our free download on our checklist for running PAYE and Limited Company payments for agency workers.

 

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