Offshore contractors and consultants face a massive tax shake-up next year as the government scraps their right to claim travel expenses.
From April 2016, anyone working through a personal service company or an umbrella company who cannot prove they are self-employed will lose the cost of travelling from their home to a workplace.
This will particularly hit contractors and consultants who travel overseas to work.
They will lose the right to reimburse the cost of travel, meals and accommodation they pay out because the expenses will be classed as commuting from April 2016, which is an expense workers cannot offset against tax.
The government expects to raise an extra £635 million in tax revenues from the measure by 2020.
Who is affected by the tax change?
HM Revenue & Customs (HMRC) has stated any contractor or consultant netted in the IR35 tax rules for personal services companies or any worker employed through an intermediary, such as an umbrella company or recruitment agency working at the ‘supervision, direction or control’ of any person can no longer claim travel and subsistence expenses.
What are travel and subsistence expenses?
Travel and subsistence covers a wide range of expenses, such as mileage costs, rail and air fares, taxis, meals, accommodation, tolls, parking. The costs of running a vehicle also come under this heading if mileage is not claimed – like the MoT, insurance, repairs and fuel.
Who can claim these expenses?
Anyone who can prove they are genuinely self-employed – basically contractors and consultants with several clients who do not work under the supervision, direction or control of someone else.
What travel claims are barred?
Contractors and consultants can still claim for travel between different workplaces, but can no longer claim the cost of commuting from their home to a workplace.
What does the industry say?
Samantha Hurley head of external relations & compliance at The Association of Professional Staffing Companies (APSCo) said: “Anyone working for an umbrella company is unlikely to pass the supervision test.
“For workers with personal service companies, if they fall within IR35 legislation, they lose their claim, but those who can show they are outside of IR35 rules can continue to make claims.”
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