Finance Bill 2016: Travel & Subsistence Summary

The new dividends tax, GAAR penalties and a permanent Office of Tax Simplification. Just three of the many parts in yesterday’s Finance Bill that contractors already knew about.

But the part that impacts most contractors and which has the most new detail is that of Travel and Subsistence tax relief, writes Paul Gough, managing director of Intouch Accounting.

In a nutshell

• PSC contractors who are truly independent and are not ‘disguised employees’ (outside IR35) can still claim tax relief on T&S costs after April 2016.
• This won’t be the case for many umbrella workers. IR35-caught PSCs won’t be able to claim either.

What the T&S legislation means for you

• If you are currently an umbrella contractor under Supervision, Direction or Control (or the right of SDC) of the client, or any party related to them, then you cannot claim tax relief on T&S expenses from April 2016.
• You are automatically deemed to be under SDC; the umbrella (your employer) must determine otherwise to HMRC with the help of the client, if you want T&S relief.
• Clients and agencies will have to provide information to help umbrellas decide on the existence of SDC.
• The exception is where all services are conducted at the client's home (domestic workers for instance).
• If your employer (the umbrella) gets this decision wrong then the umbrella (or its directors if the umbrella declines) may have to pay any underpaid tax.
• If your umbrella does not pay the tax, or the client or agency provide false or incorrect information, they too may be in the frame to pay HMRC the unpaid tax.
• If you are an umbrella worker not under SDC then you can claim T&S relief after 6th April 2016 (but not at source)
• If you are a contractor operating via a PSC (limited company) and are outside of IR35, then it’s business as usual and you can claim T&S relief from April, as today.
• PSC contractors can claim T&S relief on travel to the client, and where they are outside of IR35 (but not inside IR35).
• If you are a PSC outside of IR35 then the SDC test is not applied.