Contractors are being urged to highlight the impact the removal of tax relief on subsistence and travel expenses claims would have on the contracting industry if HMRC proposals go ahead. An online survey has been created to collect responses.
The Government believes that some service providers have abused the current travel and subsistence expense tax relief rules – mainly via the use of overarching employment contracts. These practices allow some workers to claim tax relief on expenses that they would not otherwise be entitled to.
So, as a result, tax relief will no longer be available to umbrella company employees and limited company (PSC) employees who are under the ‘supervision, direction and control of the end-user’.
A consultation period is currently underway, and if the Government’s plans stay as they are, the new restrictions will become law from April 2016.
You can read more about the background to the proposals here.
The problem – ‘Supervision, Direction and Control’
If the new rules come into play unaltered, then professional contractors may also be unfairly targeted, even though the legislation is primarily aimed at payroll companies in the lower end of the market.
And, if tax relief is withdrawn to those who are deemed to be under the ‘supervision, direction and control of the end-user’, how is this status determined?
Furthermore, the legislation will make umbrella companies and even end-clients liable for any debts which may arise from contractors claiming tax relief when they are not eligible to do so.
Contractors urged to make their voices heard
Following the recent summer Budget, Chris Bryce, CEO of IPSE summed up the problem very concisely: “Independent Professionals travel the length and breadth of the country and abroad, visiting their clients’ sites and providing much-needed expertise. It’s an expensive business and if those expenses aren’t tax-deductible, they won’t be able to do it. It’s as simple as that.”
AUCAE, which counts many of the UK’s professional umbrella companies as members, is urging contractors to let HMRC know what impact the removal of tax relief of expenses will have on their lives and the contracting industry as a whole.
Worryingly, when the original consultation was launched, HMRC received just 3 responses from contractors – and as a result, they may believe that the impact on the contracting world will be minimal, according to AUCAE.
In a recent email to its members, the umbrella organisation said: “We know that this is not likely to be the case, however what we don’t have is statistics and hard facts to be able to back up why the heavy restrictions on who is eligible to claim T&S (travel and subsistence expenses) will have such a negative impact to both the Treasury and the economy as a whole.”