The government will introduce legislation in the Finance Bill 2016 under S339A ITEPA 2003, to restrict tax relief for home to work travel and subsistence expenses for works engaged through an employment intermediary. This will mean the rules are the same as for employees.
The changes take effect from 6th April 2016 and restrict the claiming of taxable reliefs on benefits claimed through PAYE known as Salary Sacrifice arrangements, which is the way we claim your tax relief through the Hamilton Bradbury Umbrella.
Generally, employees cannot claim relief on their regular commute from home to work and back, the introduction of legislation is to ensure that only eligible workers can claim this relief.
The S339A legislation is also known as IR35 and has broad scope. As a worker who is an employee of an Umbrella Company you are not caught by IR35 because the employment is taxable under PAYE however, the new rules SDC have to be applied when expenses are claimed.
Our position is that all Hamilton Bradbury contractors fall under SDC and the appropriate payroll model will be used.
Where a contractor wishes to claim their position does not fall under SDC and wishes to claim expenses, then we will apply a contract review which will cover the agency contract and the SDC questionnaire included in this document. We will also need clarify the facts with the Agency or end user client.
When it is clear that SDC does not apply then we will use the appropriate payroll model and conduct a regular review to make sure the situation hasn’t changed so that we are not in breach of the legislation.
From 6th April 2016 we will be changing from ‘Salary Sacrifice’ to the “Fixed Expenses’ model which allows a reasonable and acceptable element of tax relief on certain expenses in line with HMRC guidelines. Any excess over and above this fixed amount will be rolled over into a year-end self-assessment claim which will need to be submitted to HMRC.
In order for us to apply the correct payroll structure we need to identify your status as either ‘in’ or ‘out’ of scope of SDC and to assess your anticipated expenses.
We have reviewed our contractor base and estimate that these changes will only affect a small number who we have contacted personally to discuss. Many of you are claiming reimbursement direct from the Agency or end user as an addition to the rate and this is not affected by these changes.
The 4 Scenarios
Hamilton Bradbury contractors falling into scenarios two and four will not be affected.
Scenario 1 contractors will still be able to claim their travel and Subsistence along with other expenses, however the Fixed Expense model will mean any claims over £2500 per annum will need to be claimed through year end self-assessment, plus we will need to regularly review and apply the SDC test.
Scenario 3. contractors will be affected and will not be able to claim Travel and Subsistence, but will be able to claim certain other expenses and the Fixed Expenses payroll model will accommodate this.
The payroll structure will protect the National Living Wage, plus holiday pay element and will not allow any expenses to eat into this for payment.
Where expense claims cannot be paid due to NLW & holiday pay entitlement, or they exceed the weekly £48.07 or Monthly £208.33 threshold, these will be rolled over until the next reporting or successive pay period.
At year end or if employment has ceased before year end and we have issued a P45, any unclaimed amounts are reported to you and you will need to make a year-end self-assessment claim to HMRC.
If you feel you are eligible to claim expenses, please complete the form attached and email or upload to us using your portal and we will contact you to arrange a review.
Our feedback has indicated that most contractors are worried about year-end self-assessments and what this involves so we have made arrangements through selected accountancy firms that can offer this service at a reasonable cost.
The Hamilton Bradbury Umbrella is fit for purpose and meets all the requirements of the changes to the legislation and what it is setting out to achieve. We remain one of the best value UK Umbrella companies and the one thing that will not change is our commitment to deliver an excellent service.
If you have any questions do not hesitate to contact us on 0800 808 5427
Travel and Subsistence (T&S)- General travel or commuting to a permanent place of work and food/subsistence during the working period (daily lunch)
Intermediary- Umbrella Company or PSC
PSC- Personal Service Company, the term usually used to describe a contractor providing their own individual services via a limited company.
SDC- Supervision, Direction or Control
Supervision- Someone managing a person doing work to ensure its being done to a specific standard
Direction- Making a person carry out their work in a certain way by providing instructions
Control- Someone dictating what work a person does and how they do it.