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Changes to the way workers can claim tax relief for travel and subsistence costs are being brought in from April 2016.
There has been considerable lobbying against the measure which some organisations feared would
Relief will be restricted for workers who are:
- Supplying personal services;
- Engaged through an employment intermediary, such as an Umbrella Company or Personal Service Company
- Subject to supervision, direction and control (SDC).
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The new regulations also say if taxes aren’t paid properly or false documents are used to avoid SDC implications, directors of the intermediary and/or company will be liable, and the providers of the fraudulent documents may also be liable.
The proposals state that if supervision, direction or control is exercised by any person on the worker, relief for travel and subsistence will be restricted. Therefore, this will include any person within the contractual chain, as well as any other worker within the end client.
However, this supervision, direction and control provision brought a sigh of relief from some, as it means a likely exemption for those who operate outside IR35. Freelance businesses who are not under 'supervision, direction and control' will be able to claim the tax relief, subject to future possible changes to IR35.
But it still left many unanswered questions - not least surrounding IR35.
IPSE - IR35 Review
Self-employment group, IPSE, said that the Draft Finance Bill confirmed a better than expected Autumn Statement.
IPSE CEO Chris Bryce said: “We have always been clear that changes to tax relief for travel and subsistence should not penalise freelance businesses.
"This announcement confirms that these firms will still be able to claim, as can every other business, but we need to be careful as this is very much dependent on the outcome of the Government’s IR35 review. IPSE will use its role on the IR35 Forum to seek further clarification on when and how this review will take place.”
Danbro - stealth tax
Accountants Danbro was much more robust in its condemnation of the move and the effect it could have on the flexible economy and its workforce.
They claimed that the Government had 'ignored evidence and trampled over the livelihoods of 1.6 million flexible workers' and estimated that the move could cost British industry as much as £7bn as they make up the shortfall in lost expenses.
Danbro's managing director Damian Broughton said: “The Government has just ignored the evidence and opinions from across this hugely important sector. They claim to have policies that promote business but this does not make business easier, it makes it more expensive.
“This is a stealth tax on the most important sector to the UK economy. Thousands of businesses rely on freelance workers to provide the skills they need in a cost-effective and efficient way. This is the modern way of working and the Chancellor is risking the health of our economy by restricting its growth.
“The Government also snubs appeals about the impact on take home pay, arguing this move will support Government ambitions of creating a high-wage economy – try telling that to a contractor who will lose £200 a week from March next year.”
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Mr Broughton said: “The IR35 legislation is intrinsically connected, but the details of this still haven’t been published yet. We need that urgently so we can fully understand how to help contractors and recruitment agencies prepare.
“On the face of it, everyone could be caught out because in most cases someone will have the right to supervision, direction or control over a freelance worker. The Government are determined to push ahead in April but we still need more clarity.”
PRISM - wage demands
Crawford Temple |
Pressure group, PRISM, who have been actively campaigning against the move, waarned public and private sector employers to expect a wave of wage demands worth billions.
They said that the strict test was designed to prevent all but the most independent contractors from claiming travel expenses and that the 'vague' test will create chaos in an industry that has been a boon for Britain’s economic recovery, say experts.
Crawford Temple, CEO of PRISM, whose members include umbrella companies said: “My message to employers is brace yourself because the hole you need to plug could be worth up to £7bn.
“Rather than helping employers grow public and private enterprises steadily using flexible labour, the Government is trying to scoop up more cash all the while knowing that wage bills will have to rise.
“Officials using contractors to staff hospitals, schools and big public projects are going to get an awful shock when they start putting their hand out for more, just so they can take home what they were earning a month earlier.
“Private companies struggling to stay afloat and using flexible workers to cut full-time wage bills will be hit hard too as the difference in cost narrows.”
The new rules will come into effect in April 2016. To date up to 1.6 million contractors are estimated to claim under this expenses.
For more information about this and other matters relating to the Autumn Statement see Shout99's Political News section.
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Susie Hughes © Shout99 2015
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