Skip links

Employment Intermediaries T&S Tax Relief


HMRC’s long-awaited consultation document (below link) on employment intermediaries and tax relief for travel and subsistence claims has finally been released. As expected, the document re-affirms the sentiment echoed at March Budget 2015 by stating that:

The government’s intention is that where a worker is employed through an employment intermediary, then they will not be entitled to tax and NIC’s relief on travel and subsistence expenses incurred for home-to-work travel. Although only where they are supplying personal services to an engager, and under the right of supervision, direction or control of any person.

As I summarise at the end of this post (but would like to highlight now), it’s dangerous to read too much into this as it is currently a “consultation”! We have already seen a whole raft of distorted reviews, we will be keeping a close eye on the developments and be actively involved in responding to HMRC.

As we can see from reviewing the consultation document in more detail, the definition of an employment intermediary is wide, encompassing employment businesses (recruitment agencies), umbrella companies, and Personal Service Companies (PSC aka: Limited company). Of concern here is that this causes some ambiguity with respect to the proposed options for the transfer of liability in instances where relief is incorrectly applied. In a contractual chain which contains an engager (end client) and then potentially two different entities classed as an ‘employment intermediary’ (either a PSC and an employment business, or an umbrella company and an employment business) are HMRC suggesting that liability could be spread equally throughout the whole contractual chain? In addition to this, the right of supervision, direction, and control (SDC) need not sit solely with the engager; instead this can sit anywhere within the contractual chain. The combination of these two factors makes it hard to envisage any scenario where a temporary worker could sit out-of-scope of the proposals, and even harder to envisage a scenario where supervision, direction and control did not exist, especially when in need only be there in principle, as a right which may or may not be enacted in practice. (Confused thus far? Understandably…)

Of course, HMRC does give an example of where a worker could claim travel and subsistence relief through a lack of supervision, direction, and control (Example 1 on p.15)…but I would argue that this is only achieved by them painting an unrealistic picture of a working relationship. They offer up the instance in which a client hires an IT consultant to build them a website, but the client has no input on how the website will end up looking other than to supply the IT consultant with photos of the products they sell and their respective prices. Back in the real world I cannot think of any scenario where a client would give an IT consultant such “free reign” of the website construction in this manner. It would appear that the client could (would!) remove the worker’s ability to claim relief on travel and subsistence merely by instructing the IT consultant that the website design needed to be consistent with the client’s branding, since it would seem that such input from the client would be classed as direction.

Thinking this through, though, and it’s not too hard to envisage that this might have been HMRC’s intention all along: to set the SDC hurdle so unrealistically high that ‘in practice’ it is insurmountable and as such pretty much everyone loses out on the right to claim relief on travel and subsistence. HMRC provides a nice set of diagrams on p.13 contrasting the current position with respect to claiming relief with the proposed position under the new rules, but given the weakness of the able-to-claim-expenses example discussed above, it’s hard to see how anyone could realistically fall outside of the greyed-out area on the “proposed position” diagram.

Before we get too carried away, however as aforementioned, it’s important to remember that this is only a consultation document and is therefore not an accurate reflection of what’s actually going to happen. The proposed changes are fundamental and far-reaching, but they’re only proposals…and it’s precisely because they’re so far-reaching that they’ll be met with a strong set of responses from stakeholders. Liberty Bishop will be actively involved in the HMRC consultation process – both as an independent business and as a member of All Umbrella Companies Are Equal, the largest trade association of umbrella payroll providers – and we will work hard to ensure that HMRC understands the complexities of the sector over which it is attempting to legislate in order to allow it to introduce measures which are not only fair, but are also workable.

Thanks for taking the time to read this post, feel free to add any of your concerns that we can utilise in a response to HMRC.

Also, Liberty Bishop will be holding a seminar as and when the final documentation is released, following our esteemed ‘Onshore, Offshore… Be sure’ seminar last year – Places will go quick, to register your interest to attend: Please email [email protected] with your name and company.

Consultation document link:

Leave a comment