The government’s long awaited draft legislation on travel & subsistence (T&S) has been published and was immediately described by trade bodies representing umbrella and accountancy service providers as “disappointing”. 

Following November’s Autumn Statement, the draft legislation draft was very much as the staffing sector expected. However, it did provide clarity on where financial liability lies, where workers fail to pay the correct amount of tax. Following a further period of consultation on the technical aspects of the bill, which closes on 3 February 2016, the new legislation is set to become law on 6 April as part of the Finance Bill 2016.

Here are the key points:

Tax relief

Individuals working through employment intermediaries (umbrella providers) will not be allowed to claim tax relief on their T&S expenses, where the worker is under supervision, direction or control (SDC) in the manner in which they carry out the work.

Individuals that work through a personal service company will not be allowed to claim tax relief on their T&S expenses where the intermediaries legislation (IR35) applies, and they are not deemed as genuinely self-employed. 

Debt transfer 

End clients and recruitment companies will be potentially liable for a worker’s unpaid tax, where they provide fraudulent or misleading information to the payment intermediary. So if a recruiter tells the employment intermediary SDC doesn’t apply and the payment provider then pays T&S expenses tax free, however then HM Revenue & Customs decides SDC does apply, it will be the recruitment company and its directors or the end client that will be liable for the shortfall. 

However, in normal circumstances it is the employment intermediary and its directors that would hold liability. For example, if SDC does apply but the employment provider allows the worker to claim T&S expenses when they shouldn’t have, the debt will sit with the employment provider (the intermediary). 

Crawford Temple, chief executive of PRISM, a trade association for service providers and payment intermediaries, told Recruiter: “I am disappointed that the government had pressed ahead with the supervision and direction test.” He explained that a similar test in the construction sector had led to the many contractors being inappropriately pushed into employed (PAYE) status. 

Julia Kermode, CEO of the FCSA, a trade association for umbrella, accountancy and payroll service providers, also expressed her disappointment “the government hadn’t listened to sector” or taken account of the wider impact. “Contractors will be less willing to travel if they are not getting tax relief,” she said.

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