IR35: Tax Relief On Travel And Subsistence
A double whammy for subcontractors?
Draft legislation was published by HMRC at the beginning of December 2015 regarding tax relief on travel and subsistence for subcontractors. The good news is that if you are not caught by the IR35 rules then you can still claim tax relief on travel and subsistence ...
It's always a good idea to find out if IR35 rules are going to catch you out!
copyright: hyrons / 123rf stock photo (licensee)
The bad news is that if you are caught by IR35 then you have a double whammy: not only do you have to pay tax according to the deemed salary calculations, but you can't claim travel and subsistence on the majority of your travel either!
Tax relief is now restricted in various circumstances:
If you operate through an umbrella company - you are caught
If you have your own limited company and are within IR35 - you are caught
If you have your own limited company and are not within IR35 - you aren't caught
What is the amount of the restriction? All home to work travel will be classed as commuting from April 2016 (assuming this draft legislation comes in as expected). Normal business travel - from one office to another, or from office to a customer's premises - is still allowed.
And what are the pitfalls to look out for? Well, clearly being caught within the IR35 rules is now worse! The thing to be sure about is that you don't get caught by this. The tests are based on personal service, control and mutuality of obligation and should be well understood by now.
There was a suggestion from HMRC that they would make these tests more stringent, particularly the test of control. This hasn't made it into the draft legislation ... but IR35 certainly isn't dead and I think we can expect more on this topic in 2016!
If you're at all concerned whether you're going to get caught out by IR35, then please do get in touch on 0333 335 0422 and let's have a chat about your specific situation.
Until next time ...
I've been an accountant in and for business since 1987 and have a wide experience of consultancy, audit, accounts, taxation and wealth planning work from individuals and small businesses to multinational corporations and charities.
My eclectic interests in growing and developing business span a number of areas … and can be summarised as strategic business advice and tax saving advice.
I have worked with the Chamber of Commerce to deliver courses for people about starting up in business and have lectured about tax for a major accountancy practice and for Milton Keynes College.
I relax by reading fiction and by getting away from the office in a campervan.