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As disclosed in the Chancellor’s Autumn Statement, the Government have drafted legislation changes that will see workers employed through umbrella companies no longer being eligible for tax relief (Income Tax and Employee National Insurance) on reimbursement of their travel and subsistence expenses.
The change is expected to affect up to 430,000 umbrella company workers.
Relief will be restricted where services are supplied under the supervision, direction or control of another person.
The confusion that was surrounding the wording in the Autumn Statement documents regarding restrictions to be imposed on tax relief for Contractor Travel and Subsistence claims has now been clarified by HMRC.
The initial confusion was compounded by the fact that George Osborne made no mention of any proposed changes during his speech.
Once the dust has settled and the analysis over and done with, the Autumn Statement delivered by Chancellor George Osborne yesterday may well be looked back on as positive for business.
With the economy in good shape, and the Chancellor all too aware that he will be challenging a party leadership contest in the not too distant future, it looks as though he is trying to shirk the unpopular public image of ‘George the Cutter’.
Our interpretation of the restriction on Travel & Subsistence expenses is that it will only apply to contractors working through their own limited company that are caught by IR35 legislation.
However, other commentators in the industry interpret the statement made to be that restrictions will apply to umbrella company workers and PSC’s caught by IR35 and that potentially there may be a Supervision, Direction and Control type test to see if a worker is entitled i.e. that they are truly self-employed.
In the House of Lords Grand Committee meeting on 10th November 2015 Lord Palmer speaks out about the rushed amendments to the March Finance Bill 2015 and the good work umbrella companies do in aiding the efficient collecting of taxes.
The key points raised by Lord Palmer were:
“The March 2015 Finance Bill—not the Bill before us today—had a clause added to it without consultation, and was enacted two days after that addition was made. The Government did not notify the umbrella company sector that it would be making those changes at that late stage. In speaking today, I am seeking that the Government should think again with the current Bill and repeal the section in question.
Budget 2015 confirmed that a review of contractors expenses and in particular travel & subsistence would take place in the summer of 2015 with potential changes being made for the tax year commencing 6th April 2016. It proposes that Supervision, Direction and Control (SDC) will be the key factors in deciding whether a contractor is genuinely a self-employed or should in fact be treated as an employee of the end client where they are working.
In November 2015, prior to the release of George Osborne’s Autumn Statement, we wrote to the Chancellor raising our concerns in respect of proposed legislation changes to IR35, travel & subsistence tax relief for contractors and the one month rule that was incorrectly rumoured to being introduced for contractors working through their own limited company.
Today, 9th December 2015, we have received a reply and are thankful for the time taken in doing so.
Coincidently today is the day when the first draft of the new Finance Bill will be released. This Bill will contain the new legislation.
Umbrella contractors, like those employed by Umbrella.co.uk, had a number of reasons to smile yesterday as the Chancellor George Osborne delivered his Autumn Statement address to the House of Commons.
Following months of speculation about the impact of tax changes for contractors, the statement was relatively mild compared to some of the expectations in the contractor community.
The biggest relief for contractors employed by umbrella companies is that on first reading it appears that they will still be able to claim tax relief on their Travel and Subsistence expenses.
Our interpretation of the restriction on Travel & Subsistence expenses is that it will only apply to contractors working through their own limited company that are caught by IR35 legislation.
The Chancellor, George Osborne will deliver his 2015 Autumn Statement today Wednesday, November 25th at 12.30pm.
Along with the detail of the spending review, the Autumn Statement is rumoured to include various changes that may affect contractors and freelancers working in the UK. He is, in particular, rumoured to be targeting tax relief on travel and subsistence expenses as well as those contractors who work through their own limited company.
We will be providing regular updates throughout the speech and on reviewing the full detail of the Autumn Statement once published, which is expected in early December.
We will also be monitoring the responses in the coming days and what these changes will mean.
The Freelancer and Contractor Services Association (FCSA) has accused the government of valuing councillors over contractors, calling hypocrisy on government plans to provide travel-to-work tax relief to local councillors at the same time as talking of scrapping them for temporary workers.
At a time when the review into contractor travel and subsistence (T&S) tax-relief is ongoing, it has emerged that MPs want to award councillors a similar package of tax savings on their travel.
The government changes will exempt councillor travel expenses from income tax and National Insurance. This applies to journeys made between the councillor’s home and permanent workplace.
In a speech designed to show how well the economy was recovering and how it was prosperity all around it may have been hard to notice that George Osborne had one eye on the huge number of contractors and freelancers that support the economy and its recovery.
