ADVERTORIAL: Travel & Subsistence legislation

Matt Huddleston, Managing Director of FPS Group, explores the consequences of the recent travel & subsistence legislation and what this means for the future of payroll services.
Mon, 09 May 2016

Matt Huddleston, Managing Director of FPS Group, explores the consequences of the recent travel & subsistence legislation and what this means for the future of payroll services.

What has happened?
With effect from 6th April, HMRC have made changes preventing any contractor who is ‘Supervised, Directed or Controlled’ in their occupation from claiming Home to Work Travel and Subsistence (T&S). This brings contractors closer to the tax position of full-time colleagues, who do not receive tax relief for the costs of their daily commute.

All employees, whether contractors or not, will still be able to claim for other expenses such as business mileage, tools, professional subscriptions and training. Only those clearly outside ‘Supervision, Direction or Control’ (SDC) will be able to claim for their journeys from home to work.

Responsibility for determining whether SDC applies sits squarely with the directors of the intermediary / umbrella company making the payments. They can be held personally liable for any tax shortf all from gett ing this wrong.

What are the consequences?
It is really important that agencies know intermediary directors can rely on a defence that an agency or other third party provided them with ‘fraudulent’ evidence about the worker’s status. If successful in making this defence then liability for the missing tax shift s to the agency / third party.

From 6th April, agencies must therefore think very carefully  about providing assurances to intermediaries that their contractors are outside SDC and indeed some agencies are already including in their contracts confirmation that SDC does apply to prevent issues arising here.

The rights and wrongs of these changes (and whether they are fair or not) have been much debated. Right up until the 11th hour, umbrella company representatives and some industry bodies were appealing for clemency but to no avail.

The reality of the legislation now in force is an increased motivation for contractors to seek out alternative ways to get paid including a drive back towards self-employment and personal service companies (PSCs). Both of these are perfectly legitimate ways of working if a contractor operates genuinely independently but already carry risks of debt transfer to agencies if used inappropriately.

What does the future hold?
HMRC is fully aware of a likely increase in PSCs and has already announced plans to hold agencies responsible for policing the use of such structures in the public sector from April 2017.

Our prediction is that once again industry representatives will object, and once again they will be ignored. HMRC is not for turning on this because, unfair as it may be making agencies liable for contractor taxes, it works as a way of deterring perceived tax avoidance.

It worked for False Self Employment, it worked for Offshore Intermediaries and it will work to stop a mass migration into PSCs. It will work in the public sector and then it will be rolled out into the private sector. The future landscape of the payroll solutions sector lies in genuinely outsourced employment relationships. HMRC will continue to close down other avenues to contractors by making them ever more risky to agencies.

With this in mind, FPS Group have launched a new low-cost employment solution called Flex. This compensates contractors for a loss of T&S relief with a substantial reduction in our fees whilst protecting their employment status and rights.

Importantly, as a solution operating full PAYE & National Insurance and treating all workers as subject to SDC, it ensures agencies are entirely free from risk of tax debt transfers. Flex is a fully compliant and risk-free solution for recruiters that allows their contractors to continue to reap many of the benefits associated to
being the sole employee of a limited company, without the hassle and worries of running it. It is a low-cost durable solution which will provide peace of mind in an increasingly complex and uncertain world.

ABOUT THE AUTHOR: Managing Director Matt Huddleston BSc, FCA has worked at FPS Group for over 12 years having trained and qualified as a Chartered Accountant with Ernst and Young. Matt attributes the major success that the group has enjoyed in payroll services over more than 20 years entirely to the dedication, hard work and exceptional industry knowledge of the colleagues it is his pleasure to work with.

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