The Summer Budget suggested that there was going to be some significant changes to the contracting industry in relation to restricting contractors claiming tax relief on travel and subsistence expenses when working through an intermediary company such as an Umbrella Company or Personal Service Company.
Since the Summer Budget, Sterling have been involved in numerous round table events and consultations to provide further understanding to HMRC and government representatives as to how the contracting world through Umbrella companies actually work.
So we were eagerly awaiting the details to be released in the Autumn Statement yesterday.
Although there was no mention of these changes in the Chancellor’s speech, the Autumn Statement indeed confirms that there will be restrictions in place, effective from April 2016, on tax relief for travel and subsistence expenses for workers engaged through umbrella companies and personal service companies.
Unfortunately the detail provided in the statement is limited so there is nothing to clarify whether the criteria for the restrictions will be solely based on supervision, direction or control of the hirer and/or whether there will be any exceptions. Discussions that took place at the round table events and which were included in many responses to HMRC suggested that length of project, applying a radius allowance for travel from home to workplace, and ensuring that a contractor is treated the same as an employee of the engager at the same site could be considered as an alternative method to or in conjunction with supervision, direction and control when applying the restriction. We are expecting the finer details to be provided with the draft legislation release on the 9th December 2015 and we hope that HMRC have considered the above suggestions contained in the many responses sent to them.
There was no reference to the IR35 reform which was suggested in the Summer Budget 2015.
So what happens now? Until the draft legislation is released on the 9th December Sterling will not be making any changes and we suggest you don’t either. There is not enough information provided in the Autumn Statement to know exactly what the restrictions will mean and for who.
Rest assured, come April 2016 Sterling will continue to provide a compliant service to our contractors and agencies. There has been numerous legislation changes over the past 17 years that we have successfully managed to adapt to and we see this as no different.