Travel and Subsistence - Frequently Asked Questions
Government legislation that will take effect from 6th April 2016, therefore affecting the 2016-17 tax year onwards.
What are the changes?
The Government is introducing legislation that restricts certain contractors from claiming tax relief on their home-to-work travel and subsistence expenses. Whereas personal service companies (PSCs) and Umbrella workers could previously claim their home-to-work travel and subsistence expenses before income tax and National Insurance (NI) deductions, the new legislation will prevent such tax relief for some contractors.
Who will be affected by the changes?
The new legislation will apply to PSCs working on assignments that fall within IR35 and also umbrella workers who are subject to (or subject to the right of) supervision, direction or control (“SDC”). Such SDC can be from any party within the supply chain including the end client or the agency. The assumption is that umbrella workers are subject to SDC unless they can prove otherwise.
PAYE contractors and PSCs outside of IR35 are unaffected by the legislation. Contractors who fall within scope but do not claim any home-to-work expenses are also unaffected.
Travel and subsistence expenses that are incurred during an assignment (for example, a one-off trip to another client site) are not covered by this legislation. The change only relates to home-to-work travel and subsistence.
What do these changes mean in practice?
Contractors who are affected by the changes will have a lower take-home pay once the changes take effect.
When are the changes coming into force?
The changes will take effect from 6th April 2016, therefore affecting the 2016-17 tax year onwards.
I am an umbrella worker; how do I decide if I am subject to SDC?
Your umbrella company is your employer and will help you decide if you are subject to SDC. They will ask you questions about your assignment and, based on your answers, will discuss your options going forward. If your umbrella company needs to contact ARM for additional information about your assignment, queries should be sent to SDC@arm.co.uk.
Should I change my payment vehicle in the light of these changes?
We cannot advise you on what payment model to use; that is your decision alone. If you do decide to change your payment vehicle (move to PAYE or PSC for example), then please let us know as soon as possible so that we can make the necessary changes to your assignment.
Please be aware that we operate a strict preferred supplier list for umbrella companies; details below:
Telephone: +44 (0)1925 235 736
Telephone: +44 (0)844 324 7700
Telephone: +44 (0)800 458 0818
What do I need to do now?
Your first point of call should be your umbrella company or your accountant if you are a PSC. The way that you are paid by us as an agency will not change; it is simply how the income is treated that will be different going forward. If you are affected by the changes, then they will take effect from 6th April onwards and you will see the changes reflected in your payslip.
If you decide to change your payment vehicle, please let us know as soon as possible so that we can make the necessary changes to your assignment.