Changes to accommodation expenses rules coming in April 2016
Like other travel and subsistence reliefs, the rules for claiming accommodation expenses are changing from April 2016.
In the new tax year, contractors who have been ‘caught out’ by HMRC’s new tax rules will not be able to offset their accommodation expenses against their income, which could result in thousands of contractors paying more in tax.
Previously, the contracting community was concerned that these changes would affect everybody working through an umbrella or personal service company (PSC).
It has since been made clear that the travel and subsistence expenses crackdown will only affect umbrella contractors working under the supervision, direction or control (SDC) of their client or end user and those working through their own limited who fall within the scope of IR35.
Umbrella Company workers caught by SDC will still be able to claim travel, subsistence and accommodation in instances where they are sent to temporary locations away from their main place of work i.e. being sent to visit other sites or home visits to patients etc.
In the past, contractors have been able to offset ‘reasonable’ expenses incurred at hotels, B&Bs and other accommodation providers during essential business trips.
Miles Grady, Director at Umbrella.co.uk, highlighted the importance of this relief for contractors working away from their home base.
He said: “Curtailing the rights of contractors to claim accommodation expenses will be particularly damaging for those who regularly work away from their homes and families. Most of these contractors will have no choice but to increase their prices and pray that their clients don’t look elsewhere.
“Part of the government’s reasoning behind withdrawing these tax reliefs was levelling the playing field between self-employed contractors and those in full-time employment. It is hard to understand how the Chancellor believes a contractor travelling from say Manchester to London each week to provide a service is the same as a normal employee going to work”
Supervision, Direction and Control rules
If you are unsure whether or not you will still be able to claim travel and subsistence tax relief after April you should apply the SDC test to your situation.
Instead of focussing on what you do, where you do it or how long you do it for, SDC is concerned with how you carry out your roles and responsibilities. HMRC guidance defines the three tests as follows:
HMRC classes a contractor as supervised when there is someone overseeing the work done – ensuring they are doing the required work correctly and to the required standard.
According to HMRC, supervision can also involve a manager offering help to the contractor in order to develop their skills.
HMRC define direction as someone making a contractor work in a certain way by providing instructions, guidance or advice. The director will often take a co-ordinating role as work is being undertaken.
According to HMRC, control is someone dictating what work a person does and how they should go about doing it. This also includes having the power to move a contractor from one job to another.
If a contractor’s role meets just one of these definitions then the new regulations state that the contractor cannot claim travel and subsistence expenses like accommodation and fuel costs.
It is worth bearing in mind, however, that SDC is usually applied on a case-by-case basis so it is worth talking to a qualified professional regarding your own situation. For help and advice contact Umbrella.co.uk by calling: 0800 121 6513.