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Question: I currently contract through an “Umbrella” company and have been offered a contract which will likely last well over 24 months. One of my colleagues has suggested that I should set up my own limited company to get around the new rules affecting travelling expenses. Is this right?
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Question: I currently contract through an “Umbrella” company and have been offered a contract which will likely last well over 24 months. One of my
Colleagues has suggested that I should set up my own limited company to get around the new rules affecting travelling expenses. Is this right? An interesting and highly topical question, particularly as the whole subject of Travelling and Subsistence (T&S) is under close scrutiny due to the new Regulations introduced in April 2016, primarily aimed at “Umbrella” employed contractors. Traditionally, for relatively low paid contractors or those who are unsure of their long-term commitment to contracting, the traditional “Umbrella” offered an attractive solution to arrange their contracting affairs. As Umbrella employment contracts are “over-arching”, before the 2016 rule changes the same 24-month T&S rules were applied to Umbrella employees as applied to employees of their own limited company (PSC). However, HMRC argue that this gives Umbrella workers an unfair advantage (over other full time PAYE employees) and so amended the rules to “level the playing field”. Indeed, regular full time PAYE employees cannot claim the cost of commuting to their regular workplace. But Umbrella workers claim that as they have no regular workplace, the cost of commuting to temporary assignments (less than 24 months etc.) are journeys undertaken while performing their employment duties.
After extensive consultation, HMRC introduced regulations which effectively treat each assignment as a discrete assignment where “Supervision, Direction or Control (SDC)” (or the right of) can be shown to be present. The default position assumed by HMRC is that SDC is present where an intermediary (Umbrella or Agency) exists and therefore the onus is on the taxpayer to prove otherwise. If each assignment is discrete, then a claim for T&S will fail. Effectively, this puts an end to the traditional Umbrella as we know it. Interestingly, these regulations do NOT apply to contractors working through their own PSC. So in theory, your colleague is correct. But one word of caution – HMRC are currently also reviewing the IR35 regulations. Do not be surprised if by April 2017 we see IR35 amended to bring the new IR35 tests in line with SDC tests as outline above. See more at: http://www.anytime.uk.com/blog/should-i-setup-a-limited- company/#sthash.bl9xjps8.dpuf
