The new travel and subsistence (T&S) legislation came into force on 6th April 2016. Agency contractors have experienced yet another change to the way in which they are remunerated.
HMRC guidance states that anyone who is under, or has the right of Supervision, Direction or Control (SDC) as to the manner in which the worker provides their services, will no longer be able to claim tax relief on their travel (usually mileage) or subsistence (usually a daily food allowance) expenses. HMRC have indicated that they intend SDC to apply to everyone that works via an employment intermediary, unless there is evidence to prove otherwise. In essence, individuals working via agencies and being paid via employment intermediaries are being treated more like 'employees' by the taxman, despite perhaps personally identifying more with the self-employed in terms of the flexibility, variety and security of their work.
The Construction industry is however a robust market, and Construction workers are a resilient bunch so we will find a compliant and effective route through these changes, something the Government no doubt fully expects to happen. Ultimately, in a market experiencing a skills-shortage, the end client and main contractor will foot the majority of the additional cost where individual workers require an uplift in pay to mitigate their 'T&S losses'.
Hundreds of articles and blogs have been written on the subject recently. To help you 'see through the fog' please read below and/or call us on 08450-132303.
What does it mean to you - Companies using agencies
- If you are currently using temporary agency labour, you may be asked to increase your charge rates. The uplift should be passed on to the agency worker.
- You may need to review your pricing on future tenders, perhaps only marginally; speak to your agency contact for up to date charge rate information.
- You should be very aware of agencies (or payroll providers) who 'pitch' their CIS solution, unless you are convinced that no SDC exists (very rare for most).
- 'Third Party debt transfer' - speak to your agency about their intermediary supply chain compliance. HMRC could pursue 3rd parties (including agencies and you, the end client) if the right amount of tax is not paid.
- In essence, be sure that your preferred recruiter is acting in a compliant manner, protecting all parties including yourselves at all times. Then it should be 'business as usual'.
What does it mean to you - Agency workers
- If you previously worked via 'Umbrella' and did not claim expenses then you will experience no change. Business as usual.
- If you previously worked via 'Umbrella' and did claim T&S expenses you will no longer be able to. You will experience a drop in your take home pay, roughly equivalent to a third of the value of the expenses you were claiming each week. This is a Government/HMRC decision, not one made by your payroll provider or agency.
- You may still be able to claim non T&S-related expenses (work wear, tools, etc), but now typically via your end of year tax return.
- You will still be able to negotiate your pay rate on each assignment.
- You will still be able to work flexibly, as you have always been able to do before.
- You should still be able to be paid via your previous/existing 'Umbrella' company. Speak to them for more information.
- To maximise your take home pay you may wish to consider establishing your own 'Limited Company'. This may be especially relevant and beneficial for higher earners.
- Be very careful about any work you are offered via 'CIS' unless you are convinced that no SDC exists (which is very rare).
- Be very careful about any payroll intermediary company who tells you that your weekly T&S relief options are still open. They are not, if you are working under SDC, and you probably are.
The benefits of working with PPM Recruitment have not changed; we exist to provide our clients (companies) with a cost-effective flexible and permanent labour solution, and to provide opportunities for individuals who wish to work via a recruiter on a temporary or permanent basis. These genuine 'win-win-win' solutions happen thousands of times per year.
Whether you would like our assistance for one day, or for a much larger and longer contract, we are here to help. You can be assured that, as an REC Audited and long-established recruiter, that we will keep you compliant too. Peace of mind counts for a lot when the taxman is involved.
The below links will provide further details on the new HMRC guidance including Living wage and Minimum rates of pay, Supervision, Direction and Control(SDC) and Employment status. Further information will also be available from our PAYROLL PARTNERS, details of which can be obtained from any PPM Recruitment office.
For more information see the selected links provided below: