HMRC looking to curb travel expenses for self employed?

[Moonhawk]

I have just received an email from my accountant which indicates that HMRC are looking to put curbs on tax deductible travel expenses and subsistence allowance for self employed and freelance workers.

Whilst they say this won't affect sole traders and people running their own limited company to start with (it's initially aimed at people working under umbrella companies) - they do fear that will be the next logical step.

Anyone else heard of this?

[Moonhawk]

^^ yep that's the one.

[Moonhawk]

oyster said:

Depends if that's your only client?
If it is, I'm not convinced you're actually running a business. Neither, as it seems, is HMRC. Hence the change in the rules.

Not sure I understand this stance. If a plumber takes on a large installation project that takes 6 months and it's taking up 100% of their time during that period - do they cease to run a plumbing business just because they aren't fixing Mrs Browns leaky tap during that period?

[Moonhawk]

Adrian W said:

It is about time that contractors got treated in the same way as everyone else by the revenue.

Why should they be treated the same by HMRC when they aren't treated the same by the company they work for.

Being a permanent employee brings benefits that simply aren't available as a contractor (the company may pay relocation expenses, pension contributions, give you share options, pay NI, paid holidays, you are protected by redundancy rules etc etc).

Also - because of the transitory nature of contracts - the overheads of travel costs, subsistence, accommodation are often much higher for contractors than they are for permanent employees doing a 'normal commute'. It's not like you can move house and relocate closer to work when you are talking about 3 or 6 month contracts that could be anywhere in the country.

I don't mind everybody being treated the same - but surely it has to work both ways.

[Moonhawk]

deleted

[Moonhawk]

Rude-boy said:

GT03ROB said:

Tuna said:

If we're treated the same way as everyone else, can we please have paid holiday entitlement, free training courses, health cover, at least three months paid notice, child leave etc. etc. etc.

You do. It's in your rate. Thats why contract hourly rates are around double the staff equivalent.

The silence is deafening in response to this.

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.

[Moonhawk]

GT03ROB said:

....and its why the rate is double the staffer....

Yep. Besides it's a little disingenuous to talk about flat hourly rates when comparing a staff job to a contract one.

What we should be talking about is "total package" (including all company pension contributions, bonuses, share options, holiday pay etc etc).

If you worked out the actual monetary value of a staff job then broke this down into a "total package" hourly rate - it would be much higher than base hourly rate would suggest and i'm sure in doing so - you would find that the staffer and the contractor were actually much closer in monetary terms than their base hourly rates would suggest - especially once you took account of all the things the contractor has to pay out of their hourly rate that a staffer does not.

Edited by Moonhawk on Tuesday 28th April 14:55

[Moonhawk]

Adrian W said:

Maybe in a bank or an insurance company, but not in the real world

I have worked "in the real world" for many companies that weren't banks or insurance companies.

All of the ones I worked for paid between 10-15% annual performance related bonus. They all had "share save" schemes whereby shares were offered at a reduced rate to employees (and you pay no tax if they are left in the scheme for 5 years). All paid annual holidays, sick leave and pension contributions worth a minimum of 8% salary etc

When you tot all of this up (and more) - how much additional does it represent over your salaried hourly rate?

[Moonhawk]

Mandalore said:

Do you all have to list these travel expenses on your annual self assessment return?

I employ an accountancy firm to do this.

I submit an expenses sheet to them with scans of all receipts each month. They provide a summary to HMRC with my company tax return and I guess the breakdown/receipts are available should HMRC inspect my records.

[Moonhawk]

JB! said:

I didn't get tax relief commuting from MK to derby for 2 years and just sucked it up. I knew where the job was based when I took it.

Surely that argument applies to pretty much any 'travel to the job' expense then?

Every industry based on "contract" type work (building, plumbing, gardening, engineering etc) - the contractors always know where the job is when they take it on - regardless of whether its for 10 minutes or 10 months.

[Moonhawk]

I wonder will permanent staff also be hit by this?

For example - I know somebody who has just taken a permanent role on. This role is home based - but requires a certain amount of travel to client sites. They could (in theory) be at the same site for weeks on end.

Also the job requires that they be based out of the company offices for the first 6 months for training.

At the moment - all travel to and from the company office for training purposes as well as all travel to client sites is expensable - however depending on how these rules are changed - could it also have an impact on what permanent workers can and cannot claim too.

At what point will working on a client site or having to go into the company offices for training be considered "a normal commute" - 1 day, 1 week, 1 month?

[Moonhawk]

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?

Edited by Moonhawk on Tuesday 28th April 16:57

[Moonhawk]

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...

[Moonhawk]

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".

[Moonhawk]

plasticpig said:

Dr Jekyll said:

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.

Hmm. Well I know a few contractors. Pretty much all of them minimize their salary and maximize their income through dividends. Why wouldn't you avoid paying out loads in both employer and employee NI contributions if you can avoid it? If this isn't a tax dodge what is it?

I know people who use salary sacrifice to boost their pension.

I know people who use salary sacrifice to purchase childcare vouchers.

I know people who have purchased bikes via the government's cycle to work scheme.

All of these would seem to fall under the definition of "tax dodges" (if you define a "tax dodge" as making use of legal mechanisms to lower the amount of tax you pay).

[Moonhawk]

plasticpig said:

I am not critisisng you. I am a director and my company minimises NI payments by paying most of the directors income by way of dividends. I take the term tax dodge to mean avoidance rather than evasion.

But the term "tax dodge" makes it sound seedy and underhand (more akin to evasion rather than avoidance).

Tax avoidance is something everybody employs to some degree or another. Who voluntarily pays more tax than they should?

I don't know one person who turns round at the end of the year and sends a cheque to HMRC to make up for the tax relief they got on say their personal pension contributions, ISA etc.

[Moonhawk]

Mario149 said:

Ref the IR35 debate, I've always understood it as designed to stop contractor's gaining an unfair tax advantage compared to perm employees.

But surely that is only fair if they also gain all the advantages of being a permanent employee?