One of the controversial measures included in the draft Finance Bill 2016 was the proposed restriction of the deduction for travel and subsistence expenses incurred by certain workers caught by the IR35 rules. This proposed change was consulted on during summer 2015 and, if enacted, will significantly restrict the tax relief available for those affected.
The original proposals have been toned down to a certain extent and will only apply if the IR35 rules apply to the engagement and there is supervision, direction and control (SDC) over the worker. This now seems to be the key test to determine whether the new rules will apply and ignores the other employment status factors. The examples in the consultation document seem to suggest that if there is no expertise within the end user organisation then there is likely to be limited SDC and the worker will be entitled to relief for travelling to the client’s premises.
The original proposals have been toned down to a certain extent and will only apply if the IR35 rules apply to the engagement and there is supervision, direction and control (SDC) over the worker. This now seems to be the key test to determine whether the new rules will apply and ignores the other employment status factors. The examples in the consultation document seem to suggest that if there is no expertise within the end user organisation then there is likely to be limited SDC and the worker will be entitled to relief for travelling to the client’s premises.
Any tax debt arising from the deliberate misapplication of the rules is to be transferred ‘jointly and severally’ from the ‘intermediary company’ to its director(s). It would appear that the ‘engager’ will not now be liable, which was one of the proposals in the consultation. It is intended that these rules will be implemented where it can be shown that the ‘intermediary’ had knowingly failed to apply the rules correctly.
Please get in touch with us if these new rules are likely to have an impact on your business.
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