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Thanks Jennifer
This is a very helpful interpretation of the finance bill documents.
Having read over them myself, they were not the clearest to understand (for me anyway)!
On the cards since Autumn Statement
I think the government's direction of travel here became much clearer when David Gauke confirmed at the Autumn Statement that the government was going ahead with a review aimed at resolving the somewhat complex tests currently applied by the courts to resolve employment status.
Having HMRC invent its own, stripped-down online supervision, direction and control (SDC) test never made sense. But if a new definition is agreed and enacted in law, that would do away with a huge amount of legal faff around all of these issues.
Some AccountingWEB members are a little sceptical, however, about how long it will take the government to achieve this resolution.
SDC
‘Supervision, direction or control’ tests resurrected
HMRC withdrew these three tests for IR35 as of 6 April 2015...' What did I miss? What was withdrawn?
It's also important to point out that, for those working through umbrellas, SDC will be assumed - the onus will be on the client to provide evidence to the contrary. This is a worrying portent of where IR35 may be heading.
Just to be clear. If a
Just to be clear. If a client of mine is a PSC it does NOT have to stop claiming travel and subsistence from 6th April 16 as previously thought?
Thanks
Subject to the 24 month rule,
Just to be clear. If a client of mine is a PSC it does NOT have to stop claiming travel and subsistence from 6th April 16 as previously thought?
Subject to the 24 month rule, if they are operating outside of IR35, then no. If they are caught by IR35, then yes. However, if they are investigated and found to be within IR35, then they are likely to owe the tax on expenses in addition to employment taxes.
Subject to the 24 month rule
I think that your client may have to stop claiming travel and subsistence from 6th April 2016
The Finance Bill 2016 (section 9 page 61) brings in a new section 339A ITEPA 2003 which has the following effect in relation to employment intermediaries:
1) Each engagement is regarded as a separate employment and so the 24 month rule doesn't apply ie in effect, your client has to stop claiming travel and subsistence from 6th April 2016 because he/she is travelling to a permanent workplace.
2) However, subsection (2) says that section 339A does NOT apply if the manner in which the worker provides the services is not subject to (or to the right of) supervision, direction or control by any person. So, from 6th April 2016, if you can show that there is no supervision or direction or control (or right of) then your client can claim travel and subsistence, subject to the temporary workplace rules.
3) If your client is within IR35 then then the 'get out' in 2 above is not available and the engagement is always a separate employment. So even if you could demonstrate that there was no supervision, direction of control, if IR 35 applies, then your client can't claim travel or subsistence expenses.
Clarification point
If my Projectmsnagement company wins some business to provide project management consultancy and I chose not to do the work. Can I hire another contractor through their limited company to do the work if I have rights of substitution in the main contract or do I fall into the trap described in the article. Periods are usually 3 - 18 months on project based contracts
I ask because companies often use intermediaries and they mainly want to engage us like an agent as opposed to a consultancy. Is it better to have the contract direct with the end client as opposed to intermediaries like manpower, hays, reed etc
mmmm
In addition, a second transfer of liability is to be introduced, moving the tax debt to another relevant party where it can be proved that that party provided a fraudulent document which lead the ‘intermediary’ to being misled into making a claim but should not have done so.
Whats that chinese for.
How it will pan out
I have worked in Accountancy for over 15 years and I believe that the proposed changes if implemented will pan out as follows:
7 out of 10 accountants will understand and correctly implement the changes
1 out of 10 will be unaware of the changes
2 out of 10 will interpret the changes any way they want
Outside IR35, nothing changes
If your client is operating through a limited company (PSC) and outside IR35, the new legislation does not apply
https://www.gov.uk/government/publications/finance-bill-2016-draft-legis...
1.13
"relief will be restricted for individuals working through personal service companies where the intermediaries’ legislation (IR35) applies, and for individuals working through other employment intermediaries, where the worker is under supervision, direction or control in the manner they carry out the work."
https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil...
1.8 The government will therefore amend its proposals, so that the new measure will only apply to a PSC’s contract when it falls within the intermediaries legislation,
Outside IR35, nothing changes?
Thanks k2p2 - I am happy if I am wrong here, but the second part of 1.13 (your quote above) says relief will be restricted:
"for individuals working through other employment intermediaries, where the worker is under supervision, direction or control in the manner they carry out the work"
No definition of PSC
As the quote says, the SDC rule only applies to employment intermediaries other than PSCs - PSC contractors operating outside of IR35 can still claim. However, there is no definition of a PSC - but we can assume it means a limited company contractor/freelancer.
No definition of PSC
For the purpose of the new section 339A, "Employment Intermediary" includes PSC's. see EIM80200
PSCs
For the purpose of the new section 339A, "Employment Intermediary" includes PSC's. see EIM80200
Looking at the two quotes, I can see that there is ambiguity in the first depending on where you put the emphasis
1.13
"relief will be restricted for individuals working through personal service companies where the intermediaries’ legislation (IR35) applies, and for individuals working through other employment intermediaries, where the worker is under supervision, direction or control in the manner they carry out the work."
But the second quote appears to confirm that PSCs will only be affected when subject to IR35.
1.8 The government will therefore amend its proposals, so that the new measure will only apply to a PSC’s contract when it falls within the intermediaries legislation,
PSC's
I think that some commentators assume that "Employment Intermediary" has the same meaning as that used in the PAYE regs. There has to be more than one individual providing services to the end client for these to apply. So PSC's are generally not included unless they provide 'substitute' labour for the director / owner. Umbrella companies etc are caught.
However, for the new section 339A "Employment Intermediary" is defined as:
"A person, other than the worker, or the client, who carries on a business (whether or not with a view to profit and whether or not in conjunction with any other business) of supplying labour."(Sect 339A subsection 9 )
I think that catches PSCs (not just those within IR35) and the hmrc guidance in EIM80200 seems to back that up.
I would delighted if someone proves me wrong on this.
A PSC
Does everyone (or anyone!) use the same definition of a PSC as I do : "A company in which more than 50% of the sales revenue is derived from the services of one individual"?
I'm catching up on all of this - better late than never.
Just to be clear. If a client of mine is a PSC it does NOT have to stop claiming travel and subsistence from 6th April 16 as previously thought? I've read through the answers and am still confused. Any up to date thoughts/concrete answers? I'll continue to trawl through everything on here but would appreciate up to date thoughts if possible.
Thanks
I'm catching up on all of this - better late than never.
Just to be clear. If a client of mine is a PSC it does NOT have to stop claiming travel and subsistence from 6th April 16 as previously thought? I've read through the answers and am still confused. Any up to date thoughts/concrete answers? I'll continue to trawl through everything on here but would appreciate up to date thoughts if possible.
Thanks
Subject to the 24 month rule, if they are operating outside of IR35, they can still claim travel and subsistence. For Ltd Company contractors, the test is IR35, not SDC.