Contractors' Questions: Which expenses are outside the T&S rules?
Contractor’s Question: Which contractor expenses are caught under April’s legislation restricting tax relief on Travel and Subsistence (T&S), and which aren’t? And does the definition of ‘T&S’ comprise just travel to, from and during work, plus food while there, or does it include other costs such as professional association fees, mobile phone calls and hotel fees?
Expert’s Answer: The new T&S rules from April 6th 2016 will apply:
- in the case of a worker using their own company, if the engagement is inside IR35
- in the case of any other worker (including an umbrella worker), when the worker is subject to Supervision, Direction or Control by any person as to the manner of their work.
‘Travel’ should be taken as meaning just that - and ‘subsistence’ should be treated as meaning other expenses (such as food), incurred as a consequence of the travel.
Where the rules apply, the effect is to make each engagement for the provision of services to a particular end-client one which is to be regarded as a 'separate employment'.
The consequence of this is that, where the rules apply, a site-based worker at a single workplace for the duration of that 'separate employment’ can no longer treat the workplace as a temporary workplace.
And the consequence of that is that travel and subsistence expenses in connection with commuting to and from that workplace can no longer be claimed as deductible against tax.
Umbrella workers, who had been working under an overarching employment contract, had previously been able to treat commute expenses as to and from a temporary workplace; where the new T&S rules apply, they will no longer be able to do so. Likewise PSC workers, whose ongoing relationships with their own PSCs would generally be regarded as equivalent to an overarching employment contract.
That is all this new legislation affects; it doesn’t affect any other expenses, travel or otherwise. And don’t lose sight of the fact that (so far as I can see from the proposed legislation) travel between two places, each of which is a workplace (whether temporary or permanent) is always deductible.
However, don’t imagine that one can simply claim that one’s own home is a workplace for these purposes; there are very restrictive rules governing that.
The expert was Roger Sinclair, founder of egos, a law firm specialising in the contractor sector.
Editor’s Note: Related Reading –
Why it’s all change for umbrellas from April
Contractors’ Questions: Who’s liable if I claim expenses but am SDC?
