HMRC looking to curb travel expenses for self employed?

HMRC looking to curb travel expenses for self employed?

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Discussion

Gecko1978

9,603 posts

156 months

Tuesday 28th April 2015
quotequote all
Rude-boy said:
Tuna said:
You mean as a permanent member of staff you can't claim travel expenses from your company and get a benefit from doing so? I thought you could.

Yes, contractors' rates are higher; certainly the risk/reward ratio suits different people, and for sure there are some particularly terrible contractors, just as there are some spectacularly bad permanent members of staff. The only thing I object to is when people (permanent or contract) concentrate solely on the money and do this weird value judgement that just because there is a difference in rates something is inherently unfair.

Personally I will absolutely decide if a contract some distance from home is 'worth it' based on some combination of the work involved, the people, the skill development, the inconvenience of travel and the rate. My point is purely that as someone who has worked hard to develop a valuable and relatively rare skillset, it benefits both my client and myself to be able to travel cost effectively.

The difference is that if I took a permanent role with a company and then chose to live a hundred miles away, that's clearly a lifestyle choice. If as a business I commit to servicing clients (occasionally for extended periods of time) within a hundred miles of my home, that's a business choice.

Obviously there's a line where the 'many clients' becomes 'one client' and the 'running a business' becomes 'working for another organisation'. There are loads of tests to decide where the line should be drawn, and the 2 year rule for travel expenses seems a reasonable (if a bit arbitrary) part of that. Changing that towards 'no such thing as remote clients' seems harsh. Even if you justify it by whinging about how much contractors earn.
Firstly, and a small point of order here, I have absolutely no issue with the daily rates and so on. Contractors cost more as a single bill but are not much more expensive than a full timer (outside some specialists who would never get a full time job doing what they do as they are only needed a few days/weeks/months a year so it is easy to see why they might be telephone numbers per day).

What I have a small issue (it really doesn't exercise me, just a bit of a niggle) with is that many contractors call their spare room their office and then are going to work on one site, for one employer, for weeks and often months at a time and then claiming travel expenses based on that. There is an inequality there which is not easily swallowed. Especially by those of us who would love to work like contractors but are legally and practically prevented from doing so.
sorry to take a stance agaist wehat you said an in part I agreed till the last bit where you said you were prevented from doing so...only if you choose to do that job etc. As a contractor in the city I have to go to clients offices on a regular basis thats because they want there data to be secure etc but at times I work from home which is my office. The time I work for one client or another can be 1 month or in one case 2 years. It depends on the contract etc but end of day they all come to an end sooner or later. There is no job security so my limited company takes steps to cover for the lean times etc by reducing its tax bill and expoenses. That way when there is no work I still get paid. So its my company that gets paid and it then decides to pay me its member of staff (we have two staff me and the wife who also does same sort of work). Its a business it makes a profit it pays tax just in a different way but saying oh you can't claim x or y when I am only incurring thoes costs as part of my work seems underhand. I think HMRC are looking at getting more an more cash in so closing the tiny things that save us money.

If I was a plumber I might have contracts with say a factory an once a month or more I might go there to check on things...but I am only doing that as part of my business I do not work for that company etc so it seems a smack in the face that my employer (ltd company) cant claim the cost of that agaist tax.

Greg_D

6,542 posts

245 months

Tuesday 28th April 2015
quotequote all
Moonhawk said:
Rude-boy said:
What I have a small issue (it really doesn't exercise me, just a bit of a niggle) with is that many contractors call their spare room their office and then are going to work on one site, for one employer, for weeks and often months at a time and then claiming travel expenses based on that. There is an inequality there which is not easily swallowed. Especially by those of us who would love to work like contractors but are legally and practically prevented from doing so.
But it's swings and roundabouts surely. As a permanent employee - you may not be able to claim travel expenses for your commute, but you do gain access to other benefits not available to the contractor.

If we are going to level the playing field WRT to travel expenses - then why not all these other things?
Agency worker regulations - day 1 rights

Do some homework...

Moonhawk

Original Poster:

10,730 posts

218 months

Tuesday 28th April 2015
quotequote all
Greg_D said:
Agency worker regulations - day 1 rights

Do some homework...
Wow - condescending much?

Such regs only apply to contractors working via employment agencies - they do not apply to people contracting via their own limited company......but of course you would know that having 'done your homework' (presumably you have read page 5 of this document?)

https://www.gov.uk/government/uploads/system/uploa...

Greg_D

6,542 posts

245 months

Tuesday 28th April 2015
quotequote all
Moonhawk said:
Greg_D said:
Agency worker regulations - day 1 rights

Do some homework...
Wow - condescending much?

Such regs only apply to contractors working via employment agencies - they do not apply to people contracting via their own limited company......but of course you would know that having 'done your homework' (presumably you have read page 5 of this document?)

https://www.gov.uk/government/uploads/system/uploa...
i have done my homework, yes. There is a vanishingly small percentage of contract workers who are not found placements by an 'agency/intermediary' or are not under the direct supervision or control of a hiring legal entity (ie the client).

i will concede that there will be a small single digits percentage of contractors who will not be caught by the terms of AWR, but it is a tiny number. the vast majority of contractors will have rights to the same privileges as permie staff

FredClogs

14,041 posts

160 months

Tuesday 28th April 2015
quotequote all
Greg_D said:
Moonhawk said:
Greg_D said:
Agency worker regulations - day 1 rights

Do some homework...
Wow - condescending much?

Such regs only apply to contractors working via employment agencies - they do not apply to people contracting via their own limited company......but of course you would know that having 'done your homework' (presumably you have read page 5 of this document?)

https://www.gov.uk/government/uploads/system/uploa...
i have done my homework, yes. There is a vanishingly small percentage of contract workers who are not found placements by an 'agency/intermediary' or are not under the direct supervision or control of a hiring legal entity (ie the client).

i will concede that there will be a small single digits percentage of contractors who will not be caught by the terms of AWR, but it is a tiny number. the vast majority of contractors will have rights to the same privileges as permie staff
The vast majority of contractors in IT and Engineering opt out of these because we believe opting out protects our IR35 status (it probably doesn't).

It's frightening the level of ignorance people have about contractors and how small firms and micro companies operate.

The tax relief on travel expenses, mileage and subsistence allowance are claimed by the Ltd company and is relief from corp tax, there is no tax benefit to the employee in claiming expenses, they just get back what they spent from their company.

Moonhawk

Original Poster:

10,730 posts

218 months

Tuesday 28th April 2015
quotequote all
Greg_D said:
i will concede that there will be a small single digits percentage of contractors who will not be caught by the terms of AWR, but it is a tiny number. the vast majority of contractors will have rights to the same privileges as permie staff
Well - I am one of those "single digit percentage".


FredClogs

14,041 posts

160 months

Tuesday 28th April 2015
quotequote all
Moonhawk said:
Greg_D said:
i will concede that there will be a small single digits percentage of contractors who will not be caught by the terms of AWR, but it is a tiny number. the vast majority of contractors will have rights to the same privileges as permie staff
Well - I am one of those "single digit percentage".
I think, all told, it's best that people don't know we exist.

JensenA

5,671 posts

229 months

Tuesday 28th April 2015
quotequote all
Greg_D said:
Moonhawk said:
Greg_D said:
Agency worker regulations - day 1 rights

Do some homework...
Wow - condescending much?

Such regs only apply to contractors working via employment agencies - they do not apply to people contracting via their own limited company......but of course you would know that having 'done your homework' (presumably you have read page 5 of this document?)

https://www.gov.uk/government/uploads/system/uploa...
i have done my homework, yes. There is a vanishingly small percentage of contract workers who are not found placements by an 'agency/intermediary' or are not under the direct supervision or control of a hiring legal entity (ie the client).

i will concede that there will be a small single digits percentage of contractors who will not be caught by the terms of AWR, but it is a tiny number. the vast majority of contractors will have rights to the same privileges as permie staff
There are tens of thousands of workers covered by the AWR, However the AWR is not worth the paper to is written on, it is widely flouted, and is not enforced.

Fittster

20,120 posts

212 months

Tuesday 28th April 2015
quotequote all
JensenA said:
There are tens of thousands of workers covered by the AWR, However the AWR is not worth the paper to is written on, it is widely flouted, and is not enforced.
In PH land is flouting rules a good or bad thing?

theboss

6,879 posts

218 months

Tuesday 28th April 2015
quotequote all
There isn't anything new about this - as Eric Mc says its just application of existing rules. It's only applicable if you're performing your services under the supervision/direction/control of the end client, and if that is the case then you're almost certainly caught squarely inside IR35 anyway, in which case tax relief for expenses is minimised and nothing has changed.

Essentially everyone needs to evaluate their actual working practises and ensure they are working as autonomously as possible. Contract terms as defined on paper mean relatively little, and in my experience agencies are becoming worse at accepting revisions. In my latest engagement I've had to stake my working practises out clearly with the client, in writing, to ensure they are under no illusion that I work 'for them' exclusively or in a manner that is comparable to one of their staff.

Edited by theboss on Tuesday 28th April 18:03

Countdown

39,691 posts

195 months

Tuesday 28th April 2015
quotequote all
Moonhawk said:
The contractor (via their limited company) has to pay employers national insurance, corporation tax, fund their own pension, pay their own holidays, make provision for sickness etc.
The contractor could of course avoid Ers NI, CT, etc if he worked as a sole trader. The reason he "incorporated" was probably to minimise NI and tax in the first place.

JensenA

5,671 posts

229 months

Tuesday 28th April 2015
quotequote all
Fittster said:
JensenA said:
There are tens of thousands of workers covered by the AWR, However the AWR is not worth the paper to is written on, it is widely flouted, and is not enforced.
In PH land is flouting rules a good or bad thing?
Only if it makes them money

Dr Jekyll

23,820 posts

260 months

Tuesday 28th April 2015
quotequote all
Countdown said:
The contractor could of course avoid Ers NI, CT, etc if he worked as a sole trader. The reason he "incorporated" was probably to minimise NI and tax in the first place.
bks. It's because the client insists on dealing with an incorporated entity so that HMRC don't regard them as 'employing' the contractor and demanding employers NI etc.

Most contractors would far prefer not to go through the complication of incorporating but are forced to do by the HMRC, who then complain that if the contractors affairs appear complicated it must be a tax dodge so yet more regulations must be introduced to make the contractors life yet more complicated.

Countdown

39,691 posts

195 months

Tuesday 28th April 2015
quotequote all
Dr Jekyll said:
bks. It's because the client insists on dealing with an incorporated entity so that HMRC don't regard them as 'employing' the contractor and demanding employers NI etc.

Most contractors would far prefer not to go through the complication of incorporating but are forced to do by the HMRC, who then complain that if the contractors affairs appear complicated it must be a tax dodge so yet more regulations must be introduced to make the contractors life yet more complicated.
Double bks. The HMRC Employee vs Self Employed check is minimally (if at all) affected by whether the "Employing" firm (Client) is invoiced by a sole trader or by a LtdCo.

Dr Jekyll

23,820 posts

260 months

Tuesday 28th April 2015
quotequote all
Countdown said:
Dr Jekyll said:
bks. It's because the client insists on dealing with an incorporated entity so that HMRC don't regard them as 'employing' the contractor and demanding employers NI etc.

Most contractors would far prefer not to go through the complication of incorporating but are forced to do by the HMRC, who then complain that if the contractors affairs appear complicated it must be a tax dodge so yet more regulations must be introduced to make the contractors life yet more complicated.
Double bks. The HMRC Employee vs Self Employed check is minimally (if at all) affected by whether the "Employing" firm (Client) is invoiced by a sole trader or by a LtdCo.
I have had clients and especially recruitment agencies who specifically refuse to deal with contractors as sole traders because they want to protect themselves.
If I want the gig, I need a company.

FredClogs

14,041 posts

160 months

Tuesday 28th April 2015
quotequote all
Countdown said:
Dr Jekyll said:
bks. It's because the client insists on dealing with an incorporated entity so that HMRC don't regard them as 'employing' the contractor and demanding employers NI etc.

Most contractors would far prefer not to go through the complication of incorporating but are forced to do by the HMRC, who then complain that if the contractors affairs appear complicated it must be a tax dodge so yet more regulations must be introduced to make the contractors life yet more complicated.
Double bks. The HMRC Employee vs Self Employed check is minimally (if at all) affected by whether the "Employing" firm (Client) is invoiced by a sole trader or by a LtdCo.
This is true, what's more, even if a contractor is found to be foul of IR35 and deemed to be in disguised employment the end client has zero liability, it falls on the contractor or more importantly his Ltd company.

IR35 (this conversation is soooo 2005) is bks and I don't know of hardly any cases where contractors have actually paid any money back to the revenue, I think in all honesty (scaremongering and IR35 insurance salesmen not withstanding) that the revenue has stopped trying to enforce it. Even if you did get caught it's the company which goes pop and at worse you loose the ability to be a director when it goes bankrupt, what's more the Revenue also had massive egg on face trying to enforce s660 regulations to cripple micro businesses. As I've already stated on the thread the government will need to entirely revue the role of Ltd companies to actually make any differences, skirting around the edges trying to pinch a few quid by threatening people won't raise any sort of extra revenue and just put people of freelance and contract work which is a very healthy and important part of the UK economy.


Dr Jekyll

23,820 posts

260 months

Tuesday 28th April 2015
quotequote all
FredClogs said:
Countdown said:
Dr Jekyll said:
bks. It's because the client insists on dealing with an incorporated entity so that HMRC don't regard them as 'employing' the contractor and demanding employers NI etc.

Most contractors would far prefer not to go through the complication of incorporating but are forced to do by the HMRC, who then complain that if the contractors affairs appear complicated it must be a tax dodge so yet more regulations must be introduced to make the contractors life yet more complicated.
Double bks. The HMRC Employee vs Self Employed check is minimally (if at all) affected by whether the "Employing" firm (Client) is invoiced by a sole trader or by a LtdCo.
This is true, what's more, even if a contractor is found to be foul of IR35 and deemed to be in disguised employment the end client has zero liability, it falls on the contractor or more importantly his Ltd company.

IR35 (this conversation is soooo 2005) is bks and I don't know of hardly any cases where contractors have actually paid any money back to the revenue, I think in all honesty (scaremongering and IR35 insurance salesmen not withstanding) that the revenue has stopped trying to enforce it. Even if you did get caught it's the company which goes pop and at worse you loose the ability to be a director when it goes bankrupt, what's more the Revenue also had massive egg on face trying to enforce s660 regulations to cripple micro businesses. As I've already stated on the thread the government will need to entirely revue the role of Ltd companies to actually make any differences, skirting around the edges trying to pinch a few quid by threatening people won't raise any sort of extra revenue and just put people of freelance and contract work which is a very healthy and important part of the UK economy.
The requirement for the contractor to work through a company rather than as a sole trader predates IR35 and has nothing whatever to do with it.

http://www.itcontracting.com/contract-work-sole-tr...

FredClogs

14,041 posts

160 months

Tuesday 28th April 2015
quotequote all
Dr Jekyll said:
FredClogs said:
Countdown said:
Dr Jekyll said:
bks. It's because the client insists on dealing with an incorporated entity so that HMRC don't regard them as 'employing' the contractor and demanding employers NI etc.

Most contractors would far prefer not to go through the complication of incorporating but are forced to do by the HMRC, who then complain that if the contractors affairs appear complicated it must be a tax dodge so yet more regulations must be introduced to make the contractors life yet more complicated.
Double bks. The HMRC Employee vs Self Employed check is minimally (if at all) affected by whether the "Employing" firm (Client) is invoiced by a sole trader or by a LtdCo.
This is true, what's more, even if a contractor is found to be foul of IR35 and deemed to be in disguised employment the end client has zero liability, it falls on the contractor or more importantly his Ltd company.

IR35 (this conversation is soooo 2005) is bks and I don't know of hardly any cases where contractors have actually paid any money back to the revenue, I think in all honesty (scaremongering and IR35 insurance salesmen not withstanding) that the revenue has stopped trying to enforce it. Even if you did get caught it's the company which goes pop and at worse you loose the ability to be a director when it goes bankrupt, what's more the Revenue also had massive egg on face trying to enforce s660 regulations to cripple micro businesses. As I've already stated on the thread the government will need to entirely revue the role of Ltd companies to actually make any differences, skirting around the edges trying to pinch a few quid by threatening people won't raise any sort of extra revenue and just put people of freelance and contract work which is a very healthy and important part of the UK economy.
The requirement for the contractor to work through a company rather than as a sole trader predates IR35 and has nothing whatever to do with it.

http://www.itcontracting.com/contract-work-sole-tr...
Fair enough, I've never known anyone work as a sole trader in my industry, this is probably the reason. What a load of guff it is, would it really be too hard to just make the system simple?

plasticpig

12,932 posts

224 months

Tuesday 28th April 2015
quotequote all
Dr Jekyll said:
The requirement for the contractor to work through a company rather than as a sole trader predates IR35 and has nothing whatever to do with it.

http://www.itcontracting.com/contract-work-sole-tr...
That's somewhat specific to a particular industry though. You can find work as a contractor in the construction industry whilst being self employed.




Dr Jekyll

23,820 posts

260 months

Tuesday 28th April 2015
quotequote all
plasticpig said:
That's somewhat specific to a particular industry though. You can find work as a contractor in the construction industry whilst being self employed.
I daresay you can, but I was initially responding to the accusation that any contractor who operates through a Ltd must be running a tax dodge.