Don’t get left at the side of the road

Don’t get left at the side of the road: Changes to Travel and Subsistence Expenses are approaching fast.

Will you be losing out? 

On the 16th April 2014 HMRC published a document called “Employment Intermediaries: Temporary workers – relief for travel and subsistence expenses”. This document described the then collation government plans to eradicate the misuse of travel and subsistence rules.

Who will be affected?

The changes will not affect all contractors, only those who fall under these specific criteria:

  • Workers employed through an employment intermediary, such as an umbrella company
  • A personal service company (inside IR35)
  • A recruitment agency or employment business

Contractors who are under the supervision, direction or control of the client will only be affected.  But, what on earth does this mean? Simply put:

  • Supervision is where someone is overseeing your work.
  • Direction is where an individual makes you work in a certain way through instructions or guidance.
  • Control equates to someone dictating what work you are required to do and how.

Why is the change needed?

It came to light that a small number of umbrella companies had been using overarching employment contracts to enable contractors to claim tax relief on their work to home travel expenses – something that is not available to permanent employees.

The government believes that the tax system should be fair to all and under current arrangements some contractors are benefiting from being able to claim tax relief on their journey into work.

Be prepared for when the change happens

The proposed changes will be brought in under the Finance Bill 2016 and will be effective from 6th April 2016.

How will the change affect you? This example will show you:

Paul is an engineer and works via an umbrella company, he lives in Bicester and travels to Oxford every day to his place of work. He will no longer be able to claim this journey as a travel expense. However, if he needs to travel to London for a one off meeting he will be able to claim his travel costs as a business expense as London isn’t his normal place of work.”   

What next?

HMRC predict that the change will affect approximately 430,000 contractors. If you are one of those who will be affected by the change, maybe you should consider forming your own Limited Company.

Forming your own Limited Company maybe a suitable option, if you:

  • Consider contracting a long term career choice, or
  • You rely heavily on expenses.

Articles: Cogent Accountants