Changes to Travel and Subsistence Rules
In the 2015 budget, the Government announced an intention to target intermediaries who allowed contractors to claim tax relief on their travel and subsistence expenses (T&S).
Intermediaries, such as the Champion Umbrella business, allowed workers to benefit from claiming tax relief on items such as home/work mileage costs – the Government believed this practice was unfair because the same tax relief advantage could not be claimed by workers who are permanently employed by the end user.
New legislation was brought into force on 06 April 2016, to restrict T&S tax relief where contractors are deemed to be under the Supervision, Direction or Control (SDC) of the end user, in the manner in which they carry out the work.
Workers who are not under SDC will still be able to benefit from tax relief on their T&S but will now be required to file an annual tax return to claim some or all of the relief they are entitled to.
Champion continue to provide Umbrella services because they do offer valuable benefits to contractors, even when an individual may be deemed caught by the new SDC rules. We have designed a very robust SDC review process to help qualify the status of workers and proactively manage their expectations.
Please also note, Limited company contractors who are deemed to be outside of IR35 legislation will not be affected by the new rules, however, contractors who work as directors of their own Limited company and are classed as inside IR35, will also find that they will not be able to claim tax relief on their T&S costs.
It is feasible that many Umbrella workers will be outside of IR35 legislation (and thus outside of SDC rules) if they were to incorporate their own limited companies. Champion endorse this belief and have already seen a considerable move to this way of working in 2016.
For further information and advice, please contact us or call one of our qualified advisors on 0161 703 2549.