Published on Thursday, December 10, 2015 in category:
Last month’s Autumn Statement, and the media attention surrounding it, threatened that sweeping changes were on the way which would have a potentially devastating effect on the freelancer/contractor/SME community. We heard rumours that limited company contractors would be compelled to go PAYE after one month with the same client. We heard rumours that limited company contractors would no longer be able to claim tax relief on travel and subsistence (T&S) expenses. And we heard rumours that there would be huge advances in HMRC’s administration of IR35 and disguised employment.
These, along with the changes to dividend taxation which come into force in April 2016, would have destroyed the contractor mode as we know it. A nation of contractors and their advisers collectively held their breath. Yesterday, we were once again able to breathe out again as the 2016 Finance Bill was published and we now know what we need to know.
The only major change contractors need to be aware of is the relief given on T&S expenses. Essentially, truly independent contractors and freelancers will be unaffected, subject to the usual rules – 24 month rule, duality of purpose etc etc.
However, those who are under supervision, direction or control (SDC) will be unable to claim tax relief on T&S expenses. Effectively, this means all inside-IR35 limited companies and all umbrella contractors. Umbrella contractors not subject to SDC, can still claim relief but will not receive this at source.