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Updated Finance Bill 2016 – Travel & Subsistence

by Mike Hoyle | 6 April 2016

From today the new rules on how contractors can claim travel and subsistence whilst working on a client site come into force. There has been much talk within the industry over the past 12 months with the Finance Bill 2016 finally being issued on 24th March. The guidance is yet to be released.

For all contractors who operate through an Umbrella Company, they will no longer be able to claim travel and subsistence tax relief if they cannot show that they work independently and in the absence of any Supervision or Direction or Control. 

HMRC define Supervision or Direction or Control (SDC) as;

Supervision is someone overseeing a person doing work, to ensure that person is doing the work they are required to do and it is being done correctly to the required standard. Supervision can also involve helping the person where appropriate in order to develop their skills and knowledge.

Direction is someone making a person do his/her work in a certain way by providing them with instructions, guidance or advice as to how the work must be done. Someone providing direction will often coordinate the how the work is done, as it is being undertaken.

Control is someone dictating what work a person does and how they go about doing that work. Control also includes someone having the power to move the person from one job to another.

Having spoken to a number of umbrella providers they have been assessing their contractors and the roles worked to ascertain whether SDC applies. To determine this, they have been looking at the terms of the engagement, the contract, and the way in which the work is actually done.

Many umbrella companies are using questionnaires in order to gain information as to how the work will be done and determining whether SDC applies to the contractor. However the intermediary cannot rely upon a mere assertion that an individual contractor is not subject to SDC, they must receive evidence that there is no SDC.

Did anything change in the final Finance Bill 2016?
The legislation has only minor amendments with the exception of one point. This relates to the treatment of personal service companies (PSCs).

The revised clause now requires a PSC to consider whether it is inside or outside IR35, if they are inside IR35 then the PSC is caught by the new legislation and will no longer be able to claim travel and subsistence tax relief. 

HMRC have amended this area of the legislation to deter a raft of contractors transferring over from Umbrella’s to PSC’s but not being truly in business on their own account. 

This amendment therefore addresses the concerns that anyone operating a Managed Service Company (MSC), where a provider is involved with the company (excluding genuine accountancy services), will need to consider SDC as to whether they believe themselves to be inside or outside of IR35.

For further details of how the amended Finance Bill will affect your role as a contractor, contact your dedicated consultant.