UPDATE! Restriction of Travel and Subsistence Expenses

Following the consultation discussed in our earlier blog (here), HMRC have now confirmed how travel and subsistence expense claims will be restricted.  

Less extensive than first thought, the restriction is applied only to those who are employed by an intermediary and are supplying personal services that are subject to Supervision, Direction and Control (SDC).  HMRC has confirmed that for single person limited companies (PSCs) the restriction will be in force for those who are in contracts deemed to be ‘Inside IR35’.

The restriction is on commuting expenses, to close the gap between employees and those considered by HMRC to be in a similar position and will be in force from 6th April 2016.  If you’re affected, you won’t be able to claim travel from home to a temporary workplace or subsistence (i.e. lunch) at that workplace.

This clarification means not all contractors through umbrella companies will be restricted, but they will need to prove whether they’re subject to SDC.  Their umbrella, agency and end client will also need to assess whether the contractor is under SDC, particularly as HMRC could look at the supply chain to transfer the debt incurred if T&S expenses are falsely claimed (i.e. due to ‘false documents’).

HMRC intend to release an Employment Status Indicator (ESI) tool to give clearer guidance around IR35, expected to give a clear indicator of whether the contractor is caught by IR35.  Some anticipate that this will also look at SDC in itself.  The tool was originally meant to be released, at least in beta version, in Spring 2016 (potentially before the new tax year) but we haven’t heard anything yet.

In recent news on the topic, the FCSA along with other partners has commissioned surveys that show the increase in pay rates HMRC expected to make up for the restriction aren't going to be realised:

FCSA: Research reveals UK plc confused about T&S regulations

Hirers won't compensate contractors for T&S losses


For more information you may want to look at our earlier blog: Restriction of Travel and Subsistence Expenses

or see HMRC’s policy paper: Income Tax: employment intermediaries and relief for travel and subsistence

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