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The Chancellor used his Autumn Statement to announce he was pressing ahead with plans to largely axe travel and subsistence relief in April, despite large scale campaigning by pressure groups and interested parties.
In the policy paper published after the Autumn Statment, it said:
- Employment intermediaries and tax relief for travel and subsistence – As confirmed at Summer Budget 2015, the Government will legislate 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 applies. This change will take effect from 6 April 2016."
PRISM - disappointed and betrayal
Trade body PRISM, whose members service the needs of contractors, had led the way with a campaign designed to target MPs up and down the country for support. It forced the issue with a series of revelations warning of the damage that could be done - particularly to public services where it is feared higher wage bills could create overwhelming pressure on budgets.
Crawford Temple, CEO of PRISM, said: “Clearly we are disappointed by the announcement and the fact that the Government has failed to listen to the concerns raised by pressing ahead with this proposal.
"It represents a betrayal of contractors and places a huge obligation on HMRC to implement a rigorous enforcement strategy, something that they failed to do when similar legislation was implemented in 2014.
“We also believe that the resulting market distortions will require a wider strategic review of the legislation applying to the sector.”
Public sector
He also added that the threat to the public sector was a huge concern.
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“This was also about protecting hard working people whose work patterns often differ dramatically from those of ordinary employees. They have already told us they expect more pay to make up for these changes. We wait with trepidation to see how the knock-on effects of this policy unfold.
“The Government is walking blindly up an avenue that will net them relatively small sums, £265m by HMRC’s own reckoning, but cost stretched employers billions and penalise the most flexible workers supporting schools, hospitals and crucial huge public projects.”
APSCo - restrict tax relief
Agency group APSCo said it will be briefing its members on the changes to the travel and subsistence rules for individuals working through intermediaries, who will no longer be eligible for tax relief on their expenses unless they pass the test of being genuinely self-employed.
APSCo spokesman Samantha Hurley said: “The Chancellor confirmed what we thought that the Government will legislate 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.
"This change will take effect from April 6, 2016. Unfortunately, it appears that we will have to wait until the December 9 for the draft legislation to be published, before we will know the full details of the test that will be used to decide on someone’s employment status for tax purposes, and therefore whether they are able to claim tax relief on their expenses.”
IPSE - Review
Freelancer group, IPSE, said: “We have always been clear that changes to tax relief for travel and subsistence should not penalise freelance businesses.
"Today’s announcement suggests that these firms will still be able to claim, as can every other business, but this is very much dependent on the outcome of the Government’s IR35 review."
Shout99 will be reporting up-to-date news and expert analysis on all aspects with affect freelancers and small businesses in the Autumn statement. Keep watching our Political News section.
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Susie Hughes © Shout99 2015
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