HMRC issued a new consultation in December 2015. They are proposing to remove tax relief for home to work travel for certain workers. The proposals are intended to solve the perceived problem that workers engaged via an employment intermediary can claim tax relief on travel expenses whereas 'normal' employees cannot.
It is intended to bring the treatment of their travel expenses in-line with that of other temporary workers and contractors, whilst ensuring that those who are not under supervision, direction or control whilst undertaking their work and who are therefore akin to the self-employed continue to be able to claim relief for their travel expenses as before.
Who will be affected?
The restrictions will apply to workers who are employed through an employment intermediary, such as an umbrella company, or a recruitment agency/employment business and who are supplying personal services (largely supplying their skills or labour) under the supervision, direction or control, of any person,in the manner in which they undertake their role.
Those individuals who supply their services through small limited companies, generally known as personal service companies will no longer be able to claim tax relief for those contracts where they are required to operate the intermediaries legislation (commonly known as IR35), or they would otherwise be operating IR35
if they were not receiving all of their remuneration as employment income.
What are the new rules?
- Relief will be available for business travel but not ordinary commuting;
- Rules will no longer be based on the concepts of permanent and temporary workplaces:
- Workers will not have their journeys to multiple locations/areas which are a distance apart all treated as ordinary commuting.
Tax relief will be given for the costs of three types of journey:
- A journey made in the performance ofthe duties:
- A journey to allow a worker to attend a location which is not his main base but at which his attendance is a necessary partof hisjob:
- A journey to the worker's mainbase where all bases of the worker are "detached duty" locations.
Travel in the performance of the duties: no change to existing rules
No changes are proposed to travel in the performance of the duties.
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Scott Burkinshaw
Scott is Tax Partner at Shorts, specialising in providing strategic corporate and personal tax advice.
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