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Travel & Subsistence Seminar 15th Jan Review


We held a successful seminar on Friday 15th January 2016, at One Churchill Place (Barclays Global HQ) with a guest speaker from HMRC in attendance. Covering the latest scornful legislation to affect the contracting sector: “Employment Intermediaries and Tax Relief for Travel and Subsistence”.

There was an array of personnel from the recruitment industry in attendance, and we thank those for taking the time to come along.

For those that had other commitments and unable to attend we have the following to report;
As an established business providing contractor services, we have been following the developments with the travel and subsistence consultation very closely. To date we have played an active role in HMRC’s round-table events along with our industry peers at All Umbrella Companies are Equal trade group.

Our Director Wesley Scott kicked off the seminar giving an overview of the current working practices and how we got to this point, and of course the legislation itself. Before handing over to HMRC’s representative who had some introductory comments before opening the floor for the anticipated Q&A session.

Covering a snapshot of HMRC’s concerns along with the proposals due to take affect as of the new tax year (6th April). We’ve already covered the majority of this in a previous blog see here.

One height of concern from the audience revolved around the issue of establishing a workers employment status. Due to specific testing criteria, as there is not a singular test that is to be used in order to determine whether or not a worker is an employed-type worker.

The complexities around the two different tests was covered in a fair amount of detail, as it depends on the workers choice of employment intermediary as to which test applies.

Supervision, Direction & Control (SDC) test for umbrella workers and IR35 test for workers operating their own PSC.
Everyone appeared to agree with our forethought, that it’s notoriously difficult to prove a lack of SDC. As it stands, for Travel & Subsistence to be allowed, it must be demonstrated that the worker lacks SDC in the manner in which they carry out their work. Not only must they lack SDC in practice, but SDC must not be a contractual clause even if it is never enacted in practice.

With regards the IR35 test, those that are caught by IR35 will lose the T&S entitlement, whereas those that have self-employed working practices and fall outside of IR35 will retain the entitlement to offset T&S.

Given that they are two distinct tests, is it possible that discrepancies will arise in access to the same tax benefit, for workers carrying out the same role, simply because they use different types of employment intermediary and therefore “sit” different tests? And secondly, could such a possibility lead to any commercial advantage for those operating via a PSC?

The other highlight from those attending was the uncertainty of where the tax liability sits within the contractual chain via HMRC’s final debt transfer model.

The overall result of these pending changes is that our current flexible and mobile workforce, something which has been fundamental to the UK economic recovery, now has an incentive to become an immobile and static workforce.
Are we going to see skill shortages as a consequence in many sectors due to the contractor’s unwillingness to travel the significant distances they do now?

With these pending changes we would agree that there is likely to be a natural migration away from the use of umbrella companies towards Limited company incorporation as a result of these changes.
To be clear however, what we are not saying is that agencies should be pushing all of their workers over to new payment structures, but agencies certainly should be liaising with their preferred suppliers and enabling their contractors to receive best practice advice from those providers with regards to their trading options come 6th April.

Any change leads to opportunity and unfortunately sometimes these changes can be the motivation behind new schemes being brought to market or organisations looking to profit from compliance or audit processes.
Be comfortable in the knowledge and trust the providers that you choose to work with and do NOT rely on any 3rd party “compliance audit” that ultimately does not provide any level of protection to you as the agency, the contractor or the end client!

Having been in the market for 20 years, Liberty Bishop is a firm believer in using tried and tested models rather than trying to develop radically new solutions as specific responses to legislation adjustments.
Our response to these legislation changes will not involve introducing new solutions, but will instead be about modifying the advice we give around the same set of solutions that we’ve always offered.
There’s no magic bullet. That’s why we aren’t suggesting one.

What we are suggesting is that you know what’s coming and what the safest options continue to be. As it has always been the case Liberty Bishop’s job come April will be to offer best practice advice to every contractor that we speak to in order to assist them in determining the best suited solution for their personal circumstance.

If you are still unsure about the legislation and how this will affect your business please don’t hesitate to get in contact with the team at Liberty Bishop.

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