Important changes to tax relief rules for contractors
By Vicky Roythorne - Group Operations Manager
Draft legislation, published on 9 December 15, confirms that tax relief on travel and subsistence expenses for some contractors working via intermediaries will cease from 6th April 16. This applies mainly to contractors working through umbrella companies, although those workers who the umbrella company can prove are not under the supervision, direction or control of the end client are exempt.
For workers operating through their own Limited Companies (PSC) – tax relief on expenses can still be claimed where the worker is operating outside of IR35.
Rule changes to payment of dividends will also come into effect in April 2016 and this will affect those operating through their own Limited companies.
These changes have come after months of speculation and unhelpful media leaks, and some are contrary to industry expectations. There is still much that needs clarification and better definition, such as what actually constitutes supervision, direction and control, for example. Further reviews and announcements are still to come, primarily around IR35 legislation.
To ensure we all understand what’s going on and to comply with these mandatory legislation changes, HMRC has introduced new transfer of liability provisions. These will mainly affect intermediaries, but may also have some impact on end clients and /or recruitment agencies.
A shift in the umbrella industry models and product offerings is now inevitable and more awareness throughout the supply chain will be needed, especially in relation to supervision, direction and control of workers.
Outsource are committed to helping our contractors through these complex changes. We will be auditing our umbrella preferred supplier list to ensure compliance under the new rules and will provide you with further updates as soon as we can.
We’d like to reassure you that we are continually monitoring the government’s actions so will alert you to potential changes to IR35 as that situation becomes clearer.
All Outsource contract workers receive complimentary sponsored membership to Professional Passport. This is a valuable contractor advice website where you can find information about matters relating to contract working. Please contact me if you would like to take advantage of this.
If you are unsure of the impact of any of the above information and would like further impartial advice the Professional Passport website has a list of independently audited accountancy providers.
Please contact me if you have any questions on 01793 430021.