In the Budget of 8/7/15 the Chancellor announced a consultation on tax relief for travel and subsistence which has been published here.
The proposal to remove tax relief for travelling costs for limited company contractors and umbrella workers will only affect those ‘subject to (or to the right of) the supervision, direction or control of any person’ and is broadly in line with the Chancellor’s stated intention in the March Budget.
This will clearly not apply to limited company contractors who are operating outside IR35 and underscores again the importance of receiving clear legal advice at the outset rather than taking the risk of uncertainty regarding the vague test of control which copies the amended section 44 (2) ITEPA 2003. Control is only one of the tests to determine IR35 status but the legal position is in our view clear cut – if you are under control like an employee then you will no longer be able to claim tax relief on travelling expenses. End clients will need to be consulted prior to the start of an engagement to determine what degree of control, if any, they expect to exercise over a worker. Vigilance is needed as cases confirm that working practices can change over time.
Workers will not be able to claim tax relief for ordinary commuting but can continue to claim tax relief when travelling between client’s sites in line with employees under a contract of services.
Please contact us for more information.