The changes which have been proposed and are currently under consultation https://www.gov.uk/government/consultations/employment-intermediaries-and-tax-relief-for-travel-and-subsistence will mean that any contractor supplying their personal services, whether through an umbrella company or a single person Limited Company (PSC) who is subject to supervision, direction or control or the right thereof by any person, will no longer receive tax relief on travel and subsistence expenses from April 2016.
The consultation document states that:
“This test will be applied in a similar away to that currently used for agency workers in Section 44 (2) of ITEPA” [http://www.hmrc.gov.uk/manuals/esmmanual/ESM2037.htm]
Lisa Keeble, co-founder of AUCAE, questioned HMRC:
“That section [44 (2) ITEPA] makes a presumption of SDC if the worker is engaged through an employment agency – will that be the case now?”
The response was brief but to the point “Yes, we will be replicating the revised section 44”
Consequently, if the proposals go through, without alteration, then, regardless of whether there is supervision, direction or control in reality, it will be presupposed when contractors secured their contract through a recruitment agency.
AUCAE believes that these proposed changes will have a significant impact on the industry and also on the wider economy and would encourage contractors to voice their opinion. A ContractorUK regular know as Eek has set up a survey here http://forums.contractoruk.com/accounting-legal/107948-survey-hmrc-consultation-regarding-travel-expenses-up.html and AUCAE is also running a survey which has already had almost 400 responses http://www.allumbrellacompaniesareequal.com/blog/aucae-launch-national-contractor-survey .
We would urge contractors to get involved in this consultation by completing either of these surveys before the deadline on 30th September 2015 especially as the recently published IR35 discussion document uses the same test of SDC and, presumably, the same criteria will apply.