Budget hints at removing relief for contractors’ travel costs
Last week the Chancellor delivered his final Budget before the country goes to the polls in a few months’ time. For contractors there were two significant announcements, the first being a restriction on the rules for travel and subsistence and, secondly, the replacement of tax returns by digital tax accounts for small businesses and individuals.
Travel expenses
In his Autumn Statement last year George Osborne signalled that the government would review the use of overarching contracts of employment for temporary workers which was closely followed by a discussion document. Whilst it was clear that they finally intended to nullify the exploitation by Umbrella companies of the travel and subsistence rules, there was also a hint that proposed measures could also have an effect on Personal Service Companies (PSCs).
One of the options contained in the discussion document was to amend the rules on travel and subsistence to deny relief for home to work travel for those workers engaged under an overarching contract of employment by an employment intermediary to work for a third party. This would work by classifying the end clients’ workplace as a ‘permanent workplace’. However, the government said that it wanted to give careful consideration to unintended consequences to contractors before taking any final decision on the overall approach and how it is applied in these circumstances.
Following on from the review, we were told last week that the travel and subsistence rules for home to work travel will be changed where workers:
- are engaged through an intermediary, e.g. an Umbrella company or a PSC; AND
- are under the supervision, direction or control of the end user.
These measures are to take effect from April 2016, subject to consultation on the detail of the changes.
Rather than encouraging freelancers, who are taking on the risks of running a business, to make their businesses more profitable, the government seem more intent on stifling them with these proposals. The aspect of control now takes on another level of importance to PSCs in their efforts to prove that they are not subject to end client control and may lead to contractual clauses receiving greater attention.
You could have a scenario whereby a degree of control is exerted over a contractor but by virtue of the other status tests they are not caught by IR35. However, they will not be able to claim associated travel costs. This needs to be addressed in the consultation period.
Agencies who engage with Umbrella companies or PSCs to provide temporary workers to end clients will also be affected by these changes as the loss of tax relief will lead to an increase in the cost of the supply of temporary labour to the end user.
Digital tax accounts
There are not many of us who will grieve the demise of the tax return, save for accountants and tax advisers who will lose a fee for carrying out the annual and onerous task of completing returns for their clients.
Last week’s proposals to do away with the tax return and replace it with a digital tax account will affect 5 million small businesses and 10 million individuals by early 2016, reaching 50 million individuals and small businesses by 2020.
Individual online accounts will offer simple, personalised and secure information processing with the consolidation of all information in one place regarding a taxpayer’s affairs, including their payment position and payment options.
HMRC will automatically use information it holds, such as income tax, NIC and pensions along with third party data, including interest from banks and building societies, to populate a person’s online account.
Individuals will be able to lodge accounts and pay their tax throughout the year by linking to a bank account, and will be able to see exactly where they stand as HMRC automatically updates the information it is provided.
The government have promised a ‘roadmap’ on how it will deliver these changes later this year which will also further outline the scope and measures needed to bring about these changes.
So no more rushing around in January but what will happen with regard to fines and penalties that currently exist for late submission and errors contained in tax returns?
Jeez! Are the ever gonna leave us WORKERS alone? I, like many others, do work all over the country so why shouldnt I get my expenses allowed against servicing these contracts? If this does becomes an unallowable expense all it will do is put the rates up and make projects in remote locations more expensive!
We have been through “the latest tax scheme” so so many times such as SC60, 714, CIS, Umbrella, PSC, Agency workers legislation etc etc already in my over 20 years freelance – Can you remember when the government of the day actually ENCOURAGED people to start a business? Who would do that now after they looked into the paperwork and stress involved? Dont they realise being self employed and employing people is already a terrible risk and a logistical nightmare and that if no-one does anything or makes anything anymore in this country then there will be NO PROFITS OR TAX left for the bureaucrats to fight over??
It seems to me theres a third of the country intent on doing nothing to contribute but simply take benefits, handouts or live off others stupid enough to let them do so, a third (at least) are unnecessary and ever increasing number of bureaucrats and government agencies policing the workers/benefits and dreaming up more ways to do so, then finally theres a third ACTUALLY WORKING and TRYING to make the profits, tax and being forced to pay for the other two thirds!! Everyone in my third is totally sick of the unfairness and struggle to make ends meet. I’m so tired of driving home from work each day seeing people with no intention of doing the same or contributing to society whatsoever, sat outside the pubs drinking and smoking all day blatently laughing at me stupidly paying for it all…
The construction companies I work for simply cant get enough people due to the boom and bust culture and no support or investment in apprenticeships etc. Most of the youth I talk to today wouldnt even consider a career of hard yet rewarding work on a building site! They all want the false life and values they see portrayed on reality TV shows! The Aussies, Kiwis and Eastern Europeans have now gone home to take advantace of the boom in their countries (fair play to them) and the amount of people needed on a project has probably DOUBLED due to needing one person to do the actual work and another for each one to do the health and safety paperwork for that task!!!
I just hope I can survive this ridiculousness for the next few years till my retirement (self funded of course dues to all my compulsory contributions being wasted stolen and spent by the people who were told could be trusted to safeguard it) and I will continue to exploit the result of these short term unsustainable “fixes” and “policies” to my advantage and keep busy and in constant demand as some of the few remaining who actually are prepared to do some real work.
All they do is take more & more money off us with no visible returns, so they can give it away as foreign aid without even consulting us on it.
I think we should be allowed a say in how our tax monies are spent. Eg; at the end of the tax year we could ‘vote’ as a percentage where we want our money going. Perhaps 40% schools, 30% hospitals, 10% foreign aid, 20% police.
Also, tax the religions. They’re good for nothing yet pay NO tax.
Increased rates to take account of no travel and subsistence wont happen. Clients will just look to source local contractos instead.
Personally, I dont see how withdrawing T&S sits with government’s aims for a ‘flexible, mobile workforce.’ Perhaps people should ask tory MP’s seeking re election how they square this circle?
[quote name=”Bolshiebastard”]
Personally, I dont see how withdrawing T&S sits with government’s aims for a ‘flexible, mobile workforce.’ Perhaps people should ask tory MP’s seeking re election how they square this circle?[/quote]
Technically Bolshiebastard, this means MPs shouldn’t receive T&S either. They are effectively inside-IR35 workers themselves.
Who knows what Her Majesty’s Treasury or HMRC are planning for the rest of this year. In addition to the Budget’s attempts to “level the playing field” on Travelling and Subsistence relief and the erosion of other benefits and stimulants to the flexible workforce, the Finance Act 2015 brought in even more negative news for traditional Umbrellas. Legislation was introduced, which takes effect from April 2016, directed at Umbrella workers where the Umbrella varies the level of general remuneration paid in direct relation to the expenses claimed. From April 2016 the Government will add National insurance taxes to these payments and is planning to remove tax relief at source. Under the banner of improved regulation, simplification and protection the vulnerable the Government is again cutting off it’s nose to spite its face. Why not focus on the fraudulent tax evasion and marketed schemes of tax avoidance rather than on true independent workers who want to work hard for their benefit of their families and careers.? Give the little guy a break and pick on someone your own size. Let’s hope the second Budget on 8 July recognises the wonderful contributions made by Personal Service Company contractors to the growth of UK plc.
– Paul