Travel & Subsistence nonsense; discuss!
Come April this year, HMRC have decided, in their infinite wisdom, to remove Travel & Subsistence tax relief for workers providing their services through an intermediary where Supervision, Direction OR Control applies.
Their belief is that agency workers only work at one location (like an employee) and therefore should not be able to have this tax relief. The fact that many workers have many roles throughout a year, validly argued to HMRC by many interested parties, seemed to fall on deaf ears, helping to reduce the flexibility of the UK work force; not what the country needs right now.
There is some light at the end of the tunnel, but not a lot. If you work through a PSC (personal service company), the entitlement to claim this tax relief will be aligned with your IR35 status, so if your assignment is outside of IR35 you can claim it.
If you work through an Umbrella company, as I mentioned, this all hinges around whether Supervision, Direction OR Control applies, and the very flawed test that HMRC will apply. Essentially, if you are subject to Supervision, Direction OR Control as to the manner in which you undertake your services, by ANYONE in the supply chain, you will be unable to claim the tax relief. There will be an assumption of SDC so umbrellas will automatically not claim the tax relief. However, if an end client confirms no SDC, the tax relief can apply. There is a very big HOWEVER though.
Even if Supervision, Direction OR Control does not appear to apply, the fact that anyone in the supply chain COULD exercise Supervision, Direction OR Control, even if they don’t then it still applies. Many clients may not want to risk confirming there is no SDC when the test is not black and white.
What will be the results of this?
For PSCs, it will currently have very little affect (but wait until next year when the review of IR35 has finally finished its consultation!)
For Umbrella workers, take home pay may be reduced – which could push up charge rates to clients across all sectors
Many Umbrella workers may decide to work through their own PSC which is not always the right model for them.
In theory, it will affect 40% of the market as 60% do not currently claim this tax relief anyway.
In the light of the Google and Starbucks corporation tax debacles, this vastly sweeping attack on the flexible workforce market, across tens of thousands of workers, will raise about the same as Google have finally paid in tax. Worth the effort? I don’t think so – go focus on a few more multinationals and HMRC might see its revenue grow.