Contractors, petition HMRC to keep T&S relief
If people fail to influence policy, then those people should not complain when that policy fails them, writes Paul Hughes of umbrella company i-Paye Ltd.
With this in mind, I have launched an e-petition against the planned removal of tax relief on Travel and Subsistence (T&S) costs for ‘SDC’ contractors. This removal, due to bite from as soon as this April, will really hurt on-site contractors. Ultimately, it will also hurt their families.
So I appeal to all hard-working contractors to take just a minute out of their day to show their support for a petition that simply wishes to retain the status quo – that tax deductions are allowable on the costs contractors incur in travelling to their site/workplace, as they are for the cost of nourishing themselves in the course of performing that work on site. Even contractors who aren’t supervised, directed or controlled (or who think they work without “the right of” SDC) should strongly consider signing the petition. It wouldn’t be unheard of for HMRC to succumb to mission creep!
The more signatures we get, the better chance we have of bringing the serious negative implications of the T&S legislation to the attention of the powers that be. One group that those powers like to be on-side with is the business community.. Well, as the ‘voice of business’ and the UK’s largest employers’ organisation, the CBI is definitely not on-side. In fact, the CBI wants to see an outright exemption from any legislation that would prohibit T&S claims for site-based workers who attend work to perform specific tasks / projects.
On behalf of industry bodies AUCAE and PRISM, I heard first-hand on January 13th the reasoned arguments that the CBI is putting forward. Also listening were officials from Her Majesty’s Treasury. I’m pleased to report that these officials were left in no doubt – having heard from the CBI - that the proposed restriction could be very detrimental to UK plc.
My own view is this: it’s clear the currently proposed test of Supervision, Direction or Control (SDC), whilst achieving the current policy objective, fails when applied to site-based workers. In general, site-based workers attend a site to perform a task of limited duration and once it is completed they move on to a new site and new client. Many workers in IT, Engineering, Construction and Power work on several projects a year and fit this definition.
These site-based workers, whether employed directly, operating through an employment intermediary or through their own personal service company, were the intended targets of statutory amendments in 1998, and this is clearly highlighted in HMRC’s own internal manuals. Indeed, before 6th April 1998, if you had been a site-based worker or a director through your own PSC, then any expenses reimbursed would have been subject to Income Tax and National Insurance.
Using the SDC test and IR35 to gauge whether a workplace is a temporary workplace (for site-based workers) will result in many PSC and umbrella contractors being denied relief, even though those they work shoulder-to-shoulder with that are directly employed will be allowed to have T&S expenses paid free of income tax. In short, in correcting one unfairness HMRC has created another.
If you are reading this article and are in one of the following categories then you might want to have your say and sign the petition.
- A site-based worker who goes from project to project and employed through an umbrella company
- A site-based worker who goes from project to project and is employed through their own personal service company*
- An agency consultant that provides site-based workers to end-users/clients/engagers
- A professional adviser who has site-based worker clients
- A representative body who has site-based workers as members
- An agency representative body that has members who provide site-based workers to end-user clients
- A client who utilises site-based workers for projects.
*If a worker is found to be within IR35 then after 6 April 2016 any expenses reimbursed by the company, as well as dividends, will be re-categorised as earnings and subject to Tax and National Insurance, whether they are site based or not. IR35 is as subjective a test as SDC, and it’s open to interpretation and change as case law progresses.
Please note; you have until February 3rd to have your say on the draft legislation and can email the HMRC policy lead with your comments. Alternatively, or as well - if you’re really keen to influence policy, the e-petition that has been launched to bring this seminal matter to Parliament’s attention can be viewed (and signed!) online.
If you have a question about contracting please feel free to ask us!