With the government having announced plans for their 2015 budget to prevent intermediaries from letting their workers claim on their taxes for travel and subsistence, it really is up in the air as to how this will affect contractors. It doesn’t help, of course, that as a contractor you are busy finding and doing work – how can you be expected to understand the intricacies of taxation laws and still put food on the table? Fortunately, we’re here to help. Keep reading to find out where you stand, and what, in fact, is going on.
Announced as a plan to bring the taxation system in line with the modern world of employment, where we do not all work for a company and often work for ourselves, the plan to restrict tax relief affects home-to-work travel and subsistence expenses for those working through an intermediary, or under direction. This plan is being put into place to ensure that these tax benefits are only available to those who are truly self-employed, in order to level the playing field and ensure no one person has an advantage over another.
The new rules, which are to be effective from April 2016, will only affect those who are under the direct control of the end-client, or are working inside IR35. Umbrella company contractors will find their ability to claim tax relief restricted, a change from when they could claim some expenses back, like travel and equipment. However, limited company contractors, contracting outside IR35, will not be affected by these changes to tax relief rules and may continue to claim tax relief. If you are a contractor who works as the director of your own Limited company, but you are within IR35, you will no longer be able to claim on travel and subsistence, however. Let it be clear, though, that for the purposes of travel, only home-to-work travel is being affected; travel for other purposes, such as once-off business meetings, may still be claimed back as a business expense.
You might find it beneficial, though, to approach us here at Phoenix to help you through this change, to better understand it and learn if, and how, it will affect you, and to assist you with any questions you might have.