Restriction of Travel and Subsistence Expenses

The 2015 Autumn Statement delivered yesterday confirmed the government’s stance on restricting T&S expenses for contractors following a period of consultation with the industry. Below is a recap of the current situation to date:

Consultation period

The government announced plans in the Budget Statement earlier this year to remove home-to-work travel and subsistence expenses where a worker is employed through an employment intermediary and under the supervision, direction or control (SDC) of any person.

The government published the consultation document on the 8th July and took feedback and held various roundtable events up until 30th September.

With this significant change being put forward, amongst others, we felt it wise to make our collective voice heard so became members of the FCSA.  They undertook an extensive lobbying campaign on behalf of various umbrella and accountancy providers on this and are continuing to do so on many of the issues facing the contracting industry.


Autumn Statement update

There wasn’t actually any mention of this in the Chancellor’s speech yesterday, which initially led some to believe they may have been spared.  Once we looked through the blue book however it was clear this wasn’t the case.

On page 116 the following text appears:

3.20 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.

This paragraph confirms that the restriction will apply to all those operating through umbrella companies. Contractors operating through a PSC (their own Ltd Company) will only face restriction if they are caught by the intermediaries’ legislation (inside IR35).

The full statement can be found here


Further clarification

As ever, this somewhat vague statement is open to interpretation and the truth is we won’t really understand exactly who is caught or how until the full details have been published. We expect to see the draft legislation released as part of the Finance Bill on 9th December, when the outcome of the consultation will also be published.


What does this mean for contractors?

Well, as mentioned above the short answer is we’re not entirely sure yet.  There is some good news in that it will not impact contractors operating a PSC outside of IR35.

Furthermore the statement refers to restricting travel relief rather than completely removing it – does this have any significance?

We could see some contractors who are currently operating through an umbrella consider switching to a Ltd Company if they believe they will fall outside IR35 to allow them to claim T&S post April.

Very much a question of watch this space!

You can read our full coverage of the Autumn Statement here

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