HMRC to align T&S legislation with the intentions of Parliament

[lucyclarityumbrella]

Lucy,

Thank you for the update. Summarising your opening post, does it follow that those umbrella users with contracts that could be deemed outside IR35 can now claim T&S once the bill is rectified?

From what I read, it is that they made a mistake and they need to rectify to ensure that there is no contradiction in what they were saying. It appears the current wording of section 339A ITEPA 2003 is incorrect which means technically the Umbrella is brought within IR35 for T&S and not SDC for T&S, only MSCs are subject to SDC for now. I think they are off to do some quick writing to alter that

[Fred Bloggs]

If you think about it all the msc managers had 2 different businesses that they could mutate into. Brookson's are definitely still around and given the amount of paperwork they are happy to do for their typical customer I don't think their business model has changed that much. It's now 1 company per contractor instead of x contractors in a company

Yes, I remember well. The MSC providers used to be very visible and openly flaunted the fact they were taking the pi55 out of Ltd Co working. The fighting fund was often mentioned in "come and get us" style provocative publicity. I don't actually see anyone these days that looks like an MSC.

[eek]

Thanks Lucy, but I did say "still operating", that case goes back to the situation almost ten years ago. Are there any MSC's operating today? If there are, they're very well hidden. Unlike the 90% schemes that are all over everywhere you look. Thanks.

If you think about it all the msc managers had 2 different businesses that they could mutate into. Brookson's are definitely still around and given the amount of paperwork they are happy to do for their typical customer I don't think their business model has changed that much. It's now 1 company per contractor instead of x contractors in a company

[Fred Bloggs]

Released today: Taxman secures MSC tribunal victory Taxman secures MSC tribunal victory | Accountancy Age

Thanks Lucy, but I did say "still operating", that case goes back to the situation almost ten years ago. Are there any MSC's operating today? If there are, they're very well hidden. Unlike the 90% schemes that are all over everywhere you look. Thanks.

[LondonManc]

I think it's the opposite.

Autumn Statement made it "clear" (or as clear as HMG do) that umbrella employees who are subject to S, D or C cannot claim travel and subsistence; limited company operators could not claim if they were inside IR35.

Legislation doesn't match the AS - it says that IR35 is the test, so umbrella company employees who are outside IR35 are allowed to claim travel and subsistence expenses.

But HMRC have said that they will correct this at the earliest opportunity, and I would expect that the legislation would be retrospective to match the Autumn Statement. The correction will be to the legislation, ie umbrella company test is SDorC not IR35, so that the legislation matches the announced policy.

Given the risk of retrospective legislation, I would be incredibly wary of claiming travel and subsistence in the meantime if I was in the situation of being outside IR35 but failing SDorC, because the intention has always been "clear". And if I was an umbrella operator, I would be even more wary about paying them - the employee could always attempt to reclaim the expenses via their self assessment though.

It is a bit ambiguous.

Interesting line now I've re-read it:
"or where the worker would be considered an employee if engaged directly with the client."

What does that mean - is that to do with the behaviours, rights, etc?
If so, then it's easy:
No redundancy
No sick pay
No holiday leave
No union representation
Treated differently wrt Christmas parties, etc
No training

[TheFaQQer]

Lucy,

Thank you for the update. Summarising your opening post, does it follow that those umbrella users with contracts that could be deemed outside IR35 can now claim T&S once the bill is rectified?

I think it's the opposite.

Autumn Statement made it "clear" (or as clear as HMG do) that umbrella employees who are subject to S, D or C cannot claim travel and subsistence; limited company operators could not claim if they were inside IR35.

Legislation doesn't match the AS - it says that IR35 is the test, so umbrella company employees who are outside IR35 are allowed to claim travel and subsistence expenses.

But HMRC have said that they will correct this at the earliest opportunity, and I would expect that the legislation would be retrospective to match the Autumn Statement. The correction will be to the legislation, ie umbrella company test is SDorC not IR35, so that the legislation matches the announced policy.

Given the risk of retrospective legislation, I would be incredibly wary of claiming travel and subsistence in the meantime if I was in the situation of being outside IR35 but failing SDorC, because the intention has always been "clear". And if I was an umbrella operator, I would be even more wary about paying them - the employee could always attempt to reclaim the expenses via their self assessment though.

[LondonManc]

Lucy,

Thank you for the update. Summarising your opening post, does it follow that those umbrella users with contracts that could be deemed outside IR35 can now claim T&S once the bill is rectified?

[cojak]

Released today: Taxman secures MSC tribunal victory Taxman secures MSC tribunal victory | Accountancy Age

Now that's interesting. I've seen these scheme providers offering to set up Ltd cos and wondered what the tax avoidance angle was.

[lucyclarityumbrella]

Released today: Taxman secures MSC tribunal victory Taxman secures MSC tribunal victory | Accountancy Age

[Fred Bloggs]

Isn't that like saying there are no tax-avoidance schemes - we have seen more emerging believing that they have a "new" concept!! I will be reading, and rereading and rereading then attempting to translate into English

Do you know of any MSC's still operating though? Because I can't think of a single one.

[lucyclarityumbrella]

Minor point, but didn't all the MSC's become accountants a long while ago? Surely, there are no MSC's now?

Isn't that like saying there are no tax-avoidance schemes - we have seen more emerging believing that they have a "new" concept!! I will be reading, and rereading and rereading then attempting to translate into English

[Fred Bloggs]

Minor point, but didn't all the MSC's become accountants a long while ago? Surely, there are no MSC's now?

[lucyclarityumbrella]

Received today from HMRC...

Travel and subsistence expenses for workers engaged through employment intermediaries

Note on the effect of the legislation
The government introduced legislation in clause 14 of the Finance Bill 2016 restricting relief on home-to-work Travel and Subsistence (T&S) expenses for workers engaged through an employment intermediary. The changes put those workers on the same terms as all others contracted directly, or through an agency contract. They took effect from 6 April 2016.

An unintended consequence has been identified affecting the application of these changes for most employment intermediaries, but not personal service companies and managed service companies. To resolve this, the legislation will be amended at the earliest opportunity. HMRC does not consider this change will affect the vast majority of workers currently engaged through employment intermediaries.

Current Application
The government announced at Autumn Statement (AS) 2015 it would restrict tax relief on T&S expenses to workers who supply their services through an employment intermediary and carry out their work under supervision, direction or control. For individuals working through personal service companies, relief would be restricted where the intermediaries legislation (IR35) applies, or where the worker would be considered an employee if engaged directly with the client.
Due to a technical point in the legislation, the restriction that came into force on 6 April 2016 does not reflect the restriction that was announced at AS 2015. So, rather than consider whether a worker is under supervision, direction or control, employment intermediaries (including umbrella companies) need to consider whether the worker would be an employee if engaged directly by the client.
The only exception to this rule is workers who are engaged through managed service companies. The restrictions apply to these workers where they are under supervision, direction or control.
Where a worker’s circumstances are such that they would be properly considered as self-employed if engaged directly, the new legislation will not apply.
Full guidance on these changes is being published on gov.uk.
Although the test used in the current legislation is different to what was announced at AS 2015, those who are working under supervision, direction or control would, in the vast majority of cases, be considered an employee if engaged directly with the client. Therefore both tests should produce the same result and this change will have a minimal effect on the individuals concerned.

Correcting the legislation
The government considers the use of a full test of employment status to determine eligibility for relief on T&S expenses to be disproportionate and burdensome for the businesses who will need to consider this legislation. It believes the simpler test of supervision, direction or control will help ensure compliance with these rules. For these reasons, the legislation will be updated at the earliest opportunity to reflect the announcement made at Autumn Statement 2015.
This amendment will ensure workers engaged through an employment intermediary will need to consider whether they are under the supervision, direction or control (or right thereof) of any person, in how they do their work. Those engaged through a personal service company will continue to be required to use the test used within the intermediaries legislation.