Contractor Travel Expenses
Soon we will have Contractor Travel expenses targeted by the Government.
For years contractors have been able to have their travel expenses tax deductable. Contractors would no longer be able to claim a tax deduction for the cost of travel from home (their office) to a client’s premises.
This applies to both Personal Service Company Contractors and Umbrella Company Contractors.
The Government discussed stopping contractor travel expenses in their consultation document brought out on December 16th called Employment Intermediaries: Temporary Workers – relief for travel and subsistence expenses.
Umbrella Companies
Umbrella Companies have a contract of employment with contractors. The contractor basically works for Umbrella Companies on a PAYE basis. However, the contractor is able to claim for some expense that a permanent employee can’t claim. For instance they can claim for contractor travel expenses.
The Umbrella Company’s office would be the ‘home’ base for a contractor. Any travel to a client’s office woudl mean that they could claimcontractor travel expenses.
The’worker’ or contractors, can claim contractor travel expenses from the Umbrella Company and be reimbursed for them and get a subsistence amount for working ‘away from the office’.
PAYE and NI would not apply to that amount as it is reimbursed contractor travel expenses. This saves both the contractor and the brolly tax money.
Government Review
The Government is in the middle of a review of all tax rules related to subsistence expenses and travel. Till that takes effect the Government, in the short term, wants to stop what they see as abuses of the expenses system.
They want to:-
- Make the end client’s premises the workplace of the contractor, where he, or she, has been supplied by a 3rd party
2. Change the status of the contractor’s employment rules. Rather than the contractor having a series of temporary placements, the contractor would have just one placement – with the Umbrella Company, even if he, or she, went off to different clients.
Contractors Using Personal Service Companies
For contractors using PSCs, this would mean that the contractor could no longer claim the cost for travel from his, or her, own office to the client’s office where the work gets done.
This would really hit contractors who work away from home, who have significant contractor travel expenses and subsistence costs, which they would then have to bear on their own.
The Government are at the consultation phase of this at the moment. It has asked for the views of contractors who operate through PSCs.
Umbrella Companies and PSCs
It was thinking of only doing it for Umbrella Company contractors.
However, they are worried that this may chase contractors out of umbella companies and into Personal Services Companies. The Government prefers contractors to be in Umbrella Companies as they collect about £10,000 a year more in tax and NI from them on average.
The will be consulting till February 10th and their decision will be announced in the Budget in march. Any decision won’t come into effect till 2016. This is after the date for the General Election.
We now have contractor travel expenses targeted by the Government.
