HMRC has released new guidance on the travel and subsistence (T&S) restrictions that came into force this month and who they will apply to.

Specifically, the new guidance tackles questions relating to the personal provision of services and supervision, direction and control.

We have summarised many of the points and picked out some of the more interesting paragraphs that could be of consequence to contractors.

The first part of the ‘replacement’ guidance considers the rules as they relate to agency workers. It clarifies that T&S restrictions could be applicable where there is a “tripartite relationship between a worker, an agency and a client, and where more than one intermediary is involved.” It also clarifies that the legislation will apply if any worker personally provides their services, irrespective of whether a worker sends a substitute.

In a bid to close what some have described as a T&S ‘loophole,’ the guidance also states that “the three conditions [for T&S restrictions] can still be met when the contract between the client and the agency doesn’t specify which workers are to personally provide the services.” Some people believed that the rules could be subverted by not naming the provider, but HMRC has made it clear that this is not the case.

The new guidance also provides some useful information and examples for how the legislation is to apply when there is more than one client and more than one intermediary involved in a transaction. We recommend you read these sections if it is applicable to you.

Supervision, direction and control (SDC)

In addition, the new guidance contained some useful information relating to SDC and whether the legislation applies.

One of the most important points to come out here concerns the evidence that HMRC or the courts would find to be ‘persuasive’ proof that SDC doesn’t apply. It says: “HMRC don’t consider signed waivers and generic statements that the manner in which the worker personally provides the services is not subject to (or the right of) SDC as satisfactory evidence.”

It also says that where evidence is considered unsatisfactory, it will seek to recover lost income tax and National Insurance Contributions from the responsible party.

In short, this means that simple statements of SDC compatibility will not be enough. Anyone seeking to avoid T&S restrictions will need to conduct a full and proper evaluation of evidence, which could be complicated.

Many will see the risks associated with it as too high and SDC will be applicable in all but the clearest of cases.

Umbrella.co.uk director Miles Grady said: “Proving a negative is notoriously difficult, so proving the absence of supervision, direction or control with any meaningful evidence is going to be very difficult indeed. This guidance has provided us with some good information, and the examples given will be useful to contractors. But I think we still need some better clarification and better tests for SDC.

“As it stands, many contractors who do legitimately operate without any supervision, direction and control will still face the T&S restrictions because lots of clients won’t want to take the risk. This could have a highly damaging effect on the flexible labour market and could be highly damaging to the nation’s productivity at a time when government desperately needs to boost this.” 

For more information call the team at Umbrella.co.uk 01625 546 610 or email team@umbrella.co.uk