Q. If a contractor is caught by the SDC test or is in IR35, how does the travel & subsistence disallow-ability work in practice? I understand how it can be excluded from corporation tax deductions, but does it need to be disclosed on a P11D? I attended a PAYE seminar this week & asked HMRC if contractor disallowable expense claims needed to be put on a P11D & they said that providing the expense claim was to reimburse expenses incurred it did not, from 6/4/16. What is the situation if the client asks the contractor to visit a remote office, which they would usually reimburse their own staff for visiting? Does it make any difference if the client pays the travel & hotel bill direct?
A. It is only where PSC’s are caught by IR35, and not simply by failing the SDC test, that the legislation will deny tax relief to travelling expenses. If the contractor has taken the view that their ongoing contract is caught by IR35 but still allows their end client to meet the cost of their travel expenses then this would have to be reported as a third party benefit by the PSC as the PSC, as employer, would have arranged or facilitated the payment of the expenses.
Thank you, that is helpful but not quite the scenario I envisaged. If the contract is within IR35 and the contractor disallows travel costs, is the loss just the corporation tax relief? Also, if the client exceptionally asks the contractor to visit a remote office occasionally and meets the travel cost in the same way they would for their own staff, is that a benefit?