Changes for Umbrella companies
Although legislation is still to be drafted, the decision has been made by Government to proceed with provisions which will attempt to ensure that employment intermediaries do not take advantage of the travel and subsistence expenses regime.
The plan is to change the rules so as to restrict travel and subsistence relief for workers engaged through an employment intermediary (being an umbrella company or a PSC - personal service company) but who ultimately work under the supervision, direction and control of the end-user.
A detailed consultation on the form of the legislation is anticipated to take place in late 2015 with the expectation being that the legislation will come into force with effect from April 2016.
The detail of the legislation is awaited with bated breath. It is a commonly held belief within the industry that HMRC will include the new drafting around Part 2 Chapter 7 ITEPA (Income Tax (Earnings and Pensions) Act 2003) but nevertheless it will be particularly interesting to see how HMRC will draft the rules so as to capture only employment intermediaries at the same time as ensuring that there is no scope for alternative models to develop. As such it is expected that the effect of the measures will be to reduce the tax effectiveness of PSCs and on those business models which have traditionally enabled substantial tax savings in connection with staffing supply.
Please contact Gurpreet Sanghera if you would like to understand more about how the introduction of this legislation might affect your business.