Has HMRC Gone Soft on Recruitment Companies?

Tax

Prior to the Autumn Statement there were so many leaked changes concerning IR35 that I was already preparing myself for delivering bad news. However, after the Chancellor’s announcement on Wednesday 25 November 2015 it appears that the government has taken a step back, where IR35 is concerned anyway. At the statement, the Chancellor made no reference to IR35 and it appears that no immediate action will be taken. Although, umbrella companies and Personal Service Companies (PSCs) are not in the clear yet as IR35 reforms are still highly likely, so watch this space. (If you would like to read what these changes are expected to involve, check out my blog: IR35 – It has Happened. However, the Chancellor did confirm that they will be going ahead with travel and subsistence expense reforms. The Summer Budget highlighted changes concerning claims for travel and subsistence by umbrella companies and PSCs. Original proposals were to remove home to work travel and subsistence tax relief for workers engaged through an employment intermediary.

The bad news is that the Autumn Statement has confirmed travel and subsistence expenses will be restricted for umbrella workers as of 6 April 2016. The good news is that whilst these changes will apply to umbrella companies the restriction will only apply to individuals working through a PSC if caught within the current “IR35” legislation, essentially meaning that if a worker would be considered self-employed if they were not working through a PSC, they can continue to claim tax relief for their travel and subsistence. Draft legislation will be published on Wednesday 9 December 2015 concerning the above reform and I will endeavour to update you of any changes.

In regards to travel and subsistence expenses PSCs look to have been let off. However, we now need to wait with baited breath to see if the changes to IR35 will be given the go ahead. In my opinion, changes are going to be taken to tighten up the rules on IR35 and hopefully due to the excellent lobbying by organisations such as APSCO the far reaching proposals outlined prior to the Autumn Statement might be watered down. This will hopefully mean the onerous additional administration work that the recruitment companies were going to face might not be so bad after all.
To read the highlights from the Autumn Statement, click here.