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TheMrs
16th December 2015, 11:50
[HMT’s David] Gauke didn’t pull any surprises out of the bag,” says ex-tax official Carolyn Walsh. “[But] a one or two-month cap…may still be a possibility if, that is; it wasn't a ruse.”

Nevertheless, from April 6th 2016, legislation will*prohibit tax relief on Travel and Subsistence expenses for umbrella and PSC workers*under ‘Supervision, Direction or Control.’

Due to net the exchequer a projected £505million between 2015 and 2020, the T&S legislation will affect 430,000 people a year, who are employed via umbrellas or agencies.

It will apply*automatically, meaning contractors will be ‘SDC’ unless shown otherwise because the government claims, “this [SDC] is how an individual carries out their duties.”

Picked this up today from Contractor News and am confused by the reference to the 430000 people per year employed via umbrellas or agencies....does this mean the only way for it not to apply is either by going direct to Client Co or by explicitly having client and agency state you are not under S D or C or they risk shared.liability? Given how few of us contract direct to client Co isn't this bad news????

meanttobeworking
16th December 2015, 11:52
Read to the bottom of the article...

TheMrs
16th December 2015, 12:05
Read to the bottom of the article...

I have...

It is still not clear whether everyone working for thru umbrella OR agency will be assumed to be under SD or C unless they can prove they should opt out. That's the worrying bit as many of us have said when pushed Client Co will bottle it.

DaveB
16th December 2015, 12:25
If you are operating as a Ltd Co. and are outside IR35 then you can continue to claim T&S as before.

TheMrs
16th December 2015, 12:26
Yes but will we Ltd working with an agency have to now demonstrate outside IR35 or just carry on as normal?

Maybe it's just me and you're all direct?.....

See quote from article

t will apply****automatically,****meaning contractors will be ‘SDC’ unless shown otherwise because the government claims, “this [SDC] is how an individual carries out their duties.”

jamesbrown
16th December 2015, 12:27
I have...

It is still not clear whether everyone working for thru umbrella OR agency will be assumed to be under SD or C unless they can prove they should opt out. That's the worrying bit as many of us have said when pushed Client Co will bottle it.

The 430k comprises a mixture of those working through brollies, those working through PSCs on contracts that are inside IR35 and those providing personal services to another individual that are not excluded services (namely, provided wholly in the client's home). In other words, if you operate through a PSC and have a contract with an agency or direct with an end client and that contract is not inside IR35, relax (for now).

jamesbrown
16th December 2015, 12:28
Yes but will we Ltd working with an agency have to now demonstrate outside IR35 or just carry on as normal?

Maybe it's just me and you're all direct?.....

That is part of the SDC regime, which does not apply to PSCs. In other words, the IR35 regime applies as normal, and the PSC must evidence their position upon investigation.

TheFaQQer
16th December 2015, 13:18
Yes but will we Ltd working with an agency have to now demonstrate outside IR35 or just carry on as normal?

Maybe it's just me and you're all direct?.....

See quote from article

t will apply****automatically,****meaning contractors will be ‘SDC’ unless shown otherwise because the government claims, “this [SDC] is how an individual carries out their duties.”

You will have to show that you are outside IR35. If you are outside IR35, then you can continue to claim T&S expenses, subject to the 24 month rule. If you are inside IR35 (or are employed by a company predominantly in the supply of labour, like an umbrella company) then you cannot claim T&S after April 2016.

If you claim T&S expenses, and are later found to have been inside IR35, then I would expect you to have to pay tax on that money, because you shouldn't have been allowed it in the first place.

mudskipper
16th December 2015, 13:21
That's my interpretation too.

Travel and subsistence: HMRC changes course | AccountingWEB (http://www.accountingweb.co.uk/article/travel-and-subsistence-hmrc-changes-course/594069) - see comments

Consider (brackets are mine!)

"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."

vs

"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).

Definitely ambiguous, but the second quote

1.8 The government will therefore amend its proposals, so that the new measure will only apply to a PSC’s contract when it falls within the intermediaries legislation,

Would suggest we are excluded.

jamesbrown
16th December 2015, 14:17
TBH, the accompanying documentation isn't very well QC'd, and there are significant mistakes where placeholders for particular sections of the EIM haven't been referenced etc. You really need to look at the draft legislation, as this will have been scrutinized more carefully. The Intermediaries legislation is contained in ITEPA 2003 Part 2, Chapter 8, of which subsections 49-53 are referenced in the draft legislation for T&S, specifically:


(3) In the case of an engagement consisting of such provision of services as
is mentioned in section 49(1) (services provided under arrangements
made by intermediaries), this section applies—
(a) only if the conditions specified in section 51, 52 or 53 are met in
relation to the intermediary (but disregarding the words “that is
not employment income” in section 50(1)(b)), and
(b) in such a case, as if subsection (2) of this section were omitted.

The reference in (b) is the explicit statement that the SDC test (in subsection 2) does not apply when the T&S is associated with a contract that is within the scope of the Intermediaries legislation (i.e. whether or not it is inside, so there is no fallback to SDC if inside IR35, although this is perhaps not a real risk, given that lack of D&C is enough to place a contract outside).

SimonMac
6th January 2016, 10:50
That is part of the SDC regime, which does not apply to PSCs. In other words, the IR35 regime applies as normal, and the PSC must evidence their position upon investigation.

So could a pre-contract check saying the contract is outside IR35 be a good start for evidence? You don't know working conditions until you are on site etc.

jamesbrown
6th January 2016, 11:00
So could a pre-contract check saying the contract is outside IR35 be a good start for evidence? You don't know working conditions until you are on site etc.

It will operate exactly as it does now, only the liability will increase to include any T&S expenses. In other words, if your working practices are inconsistent with an outside determination based on the contract only, the same risks apply (i.e. YourCo could lose, under investigation), only the liability increases (i.e. YourCo could lose more).