If you travel a lot for your business, we’re sure you’ve heard the news buzzing around the contracting world about the proposed changes to tax rules for travel and subsistence. Following the 2015 summer Budget, the Government has proposed removed of tax relief on travel and subsistence expenses for contractors who are under the ‘supervision, direction or control’ of their client. The news is extremely worrying to many of you, as it means that you won’t be able to claim these expenses in the near future.
The reason for this clampdown by Government is because some employment intermediaries (such as umbrella companies), are using overarching contracts of employment to allow temporary workers and their employers to benefit from claiming the cost of travel between home and work as an expense. The government sees this practice as unfair towards permanent employees who can’t claim this benefit.
As a result, travel and subsistence relief will be restricted for umbrella or limited company workers and only be available to workers who are genuinely self-employed and who face the risks related to independent work.
Key summary of the proposal:
Effective from April 2016, tax relief will be removed where a worker is:
• Supplying personal services;
• Workers employed through intermediaries such as umbrella companies, personal service companies, and some other employment businesses;
• Limited company directors who are working inside IR35.
• These new rules will only apply to workers who are under the direct control, supervision and direction of their end-client, or are essentially working inside IR35.
For more information on contracting and to check whether your contract is inside or outside of IR35, please speak to us. It is important to note that expense claims are often decided on a case by case basis, so we would always recommend speaking to us about your individual situation.