As we are approaching the two month mark after the 6th April 2016 agencies are reporting that they are still unsure as to what actions they need to take to avoid getting caught by the new tax rules relating to travel and subsistence expenses.
“We have had a range of queries about liability and what to do”, says Theresa Mimnagh, Associate Director of the legal and compliance consultancy Lawspeed which specialises in advising the recruitment sector and supply agencies. “In particular, we have been told by some clients that they have been advised by some suppliers and other parties that there is no reason why they should not assist with getting evidence from a hirer about whether there is supervision direction or control as to how the work is being undertaken (SDCM), and specifically, to change contracts to rule out any possibility of there being a right of SDCM. This is dangerous.”
On 6th April the rules concerning allowable home to work travel expenses against tax changed. As a result tax relief on that element of travel is limited with the result that many agency or umbrella workers may have seen their net pay packet reduce wherever they were under an employment arrangement which provided for tax relief.
“As always”, continued Mimnagh, “wherever there is some new law there will be those who wish to avoid its application and indeed legitimate avoidance, but where the circumstances are genuine, tax relief is perfectly permissible. However, some believe that obtaining a statement that there is no SDCM from the hirer is the solution. Whilst on one hand this is technically correct, the request for such a statement, which could amount to a quick fix, is a double edged sword. Who at the hirer can prove there is no SDCM and understands the SDCM test sufficiently? An agency asking a hirer to give a statement is drawn into the tax avoidance proposition and could be caught up in a tax investigation whether or not the SDCM statement is correct. If it is incorrect HMRC may go after the hirer, inevitably resulting in affecting the agency’s relationship with the hirer. An agency giving a similar statement could also face a tax claim for the unpaid tax which should be due from the contractor’s employer, with the risk extending to the agency’s directors. The only initial incentive to do this is for the benefit of the contractor and the umbrella company so why should hirers and agencies get involved?”.
The conclusion is that the very lack of clarity around this does not work for agencies and hirers, whereas historically lack of clarity on other tax aspects, such as under IR35, has worked in their favour.
Lawspeed will be discussing this and a whole range of other tax-related relationship issues at its forthcoming “Taxing Times” seminar in London on 16th June 2016. “Agencies face a particular number of potential threats as a result of the recent tax changes and we will be reviewing all of these, clarifying the actual position and advising upon practical steps that can be taken to avoid losing out”, said Mimnagh.
For full details about the seminar and how to book visit this link: http://www.lawspeed.com/Lawspeed-Tax-Seminar-June-2016.pdf