Ever since the Autumn Statement was released in 2015, contractors throughout the UK have been in a state of panic about the potential for dramatic changes that will heavily impact the amount of take home pay being accrued. The most discussed issue is that of a potential end to tax relief on travel and subsistence, meaning that individuals could be severely out of pocket. We have the facts to help clarify issues for you, so sit back and see what will affect you come April 2016.
Here is the important bit: IF YOU ARE GENUINELY A SELF-EMPLOYED CONTRACTOR AND ARE NOT A “DISGUISED EMPLOYEE” FOR ONE COMPANY, YOU WILL STILL BE ABLE TO CLAIM TAX RELIEF ON TRAVEL AND SUBSISTENCE.
We can hear lots of you breathing a huge sigh of relief, but who is going to be affected by the changes that April will bring? Well, it’s not good news for everyone and Umbrella workers look set to be hit hard.
- Any Umbrella worker that is considered and proved to be under the supervision, direction or control (SDC) of a client that has hired them, then April 2016 will mark the end of travel and subsistence claims.
- HMRC will automatically consider an Umbrella worker to be SDC and it is up to their company, with the help of the specific client, to prove otherwise. The burden of proof is totally laid at the feet of the worker.
- In the case of all services being provided within a client’s home (domestic undertakings), exceptions will apply.
- Any wrong decisions made by an Umbrella company or their directors, regarding the SDC could result in them being liable for the payment of any outstanding tax.
- If you are a Limited Company contractor and outside of IR35 parameters, you are exempt from any changes and can carry on claiming expenses as usual.
Essentially, if you are a limited Company contractor that has clearly demonstrated you sit outside IR35, you are in a strong position and can carry on enjoying tax relief in the form of travel and subsistence expenses, but we recommend that all Umbrella workers ask their companies how they might be affected. Preparation is key and you don’t want to be hit by a sudden cull in your take home money.
As with any new initiatives, it’s important to gain a clear understanding of exactly who will be affected, to what extent and what can be done to minimise the impact. In the case of travel and subsistence tax relief being removed, this could result in a number of workers needing to rethink their situation, as apposed to being manipulated into unsuitable or financially unrewarding working practices. April 2016 is certainly going to be a time of dramatic change!