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April 2016 and the potential changes to Travel & Subsistence for Contractors

You may or may not be aware that the Government is introducing new legislation which will come into force in April 2016. Although the final legislation will not be published until the middle of next month, we felt that we should bring the following to your attention.

Essentially, the Government believes that it is unfair that contractors claim tax relief on travel and subsistence expenses for home to work travel when permanent employees cannot. Consequently, HMRC have decided that workers who operate through an intermediary (recruitment agency, umbrella company or PSC) will not be able to claim for tax relief on travel and subsistence expenses if they are under the supervision, direction or control (SDC) of anyone within the contractual chain. This also applies if anyone in the chain has the 'right' to supervise, direct or control even if they don't exercise that right.

After 6th April 2016, HMRC will assume that all contractors who work through an intermediary will be under SDC unless they can prove otherwise; unfortunately they have not issued guidance as yet as to what will constitute proof.

Workers who operate through a PSC will only fall under this legislation if they also fall inside IR35. However, if you worked outside IR35 and were later found to be inside, not only would you have to pay additional taxes to make up the difference between PAYE and dividends but you would also have to pay back any tax relief that you had received on T&S expenses plus interest and penalties.

The legislation also has an element of 'debt transfer' which means that anyone in the contractual chain that provides false evidence could be held liable by HMRC.

ContractorUmbrella has fought actively against the introduction of this legislation as we believe it to be inherently unfair but it seems as though it will be going ahead although possibly with last minute amendments. This legislation is complex but I hope the explanation here makes sense to you.

If you have any questions at all regarding the proposed changes please don't hesitate to us.

We will of course keep you up to date with any further changes as and when they are announced.