Finance Act 2016

[MarkT]

So here's the bit we wanted to know about:

1.13. Employment Intermediaries and tax relief for travel and subsistence
As announced at Autumn Statement, legislation will be introduced in Finance Bill 2016 to restrict tax relief for travel and subsistence expenses for workers engaged through an employment intermediary, such as an umbrella company or a personal service company. Following consultation, relief will be restricted for individuals working through personal service companies where the intermediaries’ legislation (IR35) applies, and for individuals working through other employment intermediaries, where the worker is under supervision, direction or control in the manner they carry out the work. The legislation will include provisions for transfer of debt in appropriate circumstances to help ensure compliance. The changes will take effect from 6 April 2016. A response to the consultation was published on 9 December 2015. (Draft clause 9 and TIIN)

[jamesbrown]

I've had a quick scan of the T&S and dividend draft clauses and I can't see anything immediately untoward, but some of the transfer of debt provisions need further scrutiny. A few quotes from the materials that accompany the T&S changes:

Where the worker is within the charge of the intermediaries legislation this measure will only
apply to those contracts where a deemed employment payment is made, or would be made
if all the individual's remuneration was not being taken as employment income. In these
circumstances the supervision, direction or control test will not be used.

The legislation will include provisions for transfer of debt in appropriate circumstances to help ensure compliance.

This measure is expected to have a negligible impact on businesses and civil society organisations.

End engagers will also need to identify whether a worker is under supervision, direction or control (or the right thereof) in the manner they under take their work and will need to agree the process for ensuring this information is passed to the employment intermediary. Most end engagers will only need to take action where a worker is not under supervision, direction or control in the manner they undertake their work. Workers are assumed to be under supervision, direction or control, unless it is shown otherwise. This will not be necessary for those who are engaging a PSC, as the eligibility for relief will be determined based on whether or not the intermediaries legislation (IR35) applies.

If arrangements have been put in place, the purpose of which, or one of the main purposes of which, are to ensure that section 339A of ITEPA, travel and subsistence expenses for employees employed by ‘employment intermediaries’ do not apply. Then these arrangements are to be disregarded for the purposes of deciding whether section 339A applies.

Where an employment intermediary falls within Chapter 8 ITEPA (the intermediaries legislation) then liability will sit with the employment intermediary in the first instance. If the employment intermediary does not apply section 339A correctly and deducted tax and NICs on an amount of travel and subsistence then that liability incorrectly, then amount that has been incorrectly deducted may be transferred to the directors of the intermediary.

[jamesbrown]

There's also an interesting comment buried in the consultation on company distributions (i.e. TIS), here.

Specifically, 5.2 (highlight added):

The government would therefore be interested in receiving suggestions on what
further approaches might be adopted to prevent the conversion of income to
capital for tax reasons, whilst protecting normal commercial practice.
Possibilities include:
Amending the parts of the existing distributions legislation that deal with
income and capital;
Re-introducing some form of the close company apportionment legislation5,
which dealt with similar issues.
Alternative proposed solutions are welcome.

Seems unlikely, but it's worth noting. There was speculation along these lines back in 2010. Here's some commentary from the time, surprisingly topical given the dividend tax changes.

[supersteamer]

I couldn't really understand who will be making the SDC assessment: will it be me, myCo, agency, clientCo, HMRC or ANOther?

[Zero Liability]

I couldn't really understand who will be making the SDC assessment: will it be me, myCo, agency, clientCo, HMRC or ANOther?

An appropriately approved and remunerated third party, no doubt.

End engager suggests end client, to me, if you work via a brolly. Notice it would require them to dispute a presumption that SDC applied, i.e. stick their necks out.

[Yorkie62]

An appropriately approved and remunerated third party, no doubt.

End engager suggests end client, to me, if you work via a brolly. Notice it would require them to dispute a presumption that SDC applied, i.e. stick their necks out.

As far as I am concerned it doesn't matter. My contract explicitly states that neither the agent nor the client can, nor do they have the right to, exercise S,D or C

[northernladuk]

As far as I am concerned it doesn't matter. My contract explicitly states that neither the agent nor the client can, nor do they have the right to, exercise S,D or C

And what trumps the contract?

[Yorkie62]

And what trumps the contract?

My point being the client cannot deem me to be under S,D or C when under the terms of the contract they have no rights in this respect. Therefore, if HMRC are going to put the responsibility of determining S,D or C status, come revised IR35, on my client, they can only state that I am not under S,D or C without being in breach of contract.

[northernladuk]

Am glad you are happy with that. HMRC won't agree. Threat of breaching contract won't matter to them.

And I'd like to see you threaten your client with that even though they probably already are.

[Yorkie62]

Am glad you are happy with that. HMRC won't agree. Threat of breaching contract won't matter to them.

And I'd like to see you threaten your client with that even though they probably already are.

Who said anything about threatening the client. I would like to think that my relationship is good enough such that it would be discussed with me.