Freelancers and contractors within a limited company are currently able to claim tax relief on travel and subsistence expenses if they are a director.
In many cases, these are claimed when travelling to and from their clients’ and, for temporary accommodation and food costs when working away from home.
You are only able to claim travel expenses if the workplace is considered temporary therefore travel expenses are only allowable for 24 months. After 24 months, the workplace is no longer considered temporary, unless less than 40% of your time was spent there.
When engaging in a contract that will exceed 24 months, you will not be able to claim travel expenses at all. If, for example as you are aware your contract will continue beyond this you must stop claiming travel expenses.
In the Summer Budget 2015, the Government confirmed propositions to restrict tax relief on travel and subsistence expenses for workers who are engaged through an intermediary.
This would affect workers who are subject to supervision, direction or control of any person involved in the engagement.
HMRC define these terms (supervision, direction and control) as follows: –
- ‘Supervision is someone overseeing a person doing work, to ensure that person is doing the work they are required to do and it is being done correctly to the required standard. Supervision can also involve helping the person where appropriate in order to develop their skills and knowledge.’
- ‘Direction is someone making a person do his/her work in a certain way by proving them with instructions, guidance, or advice as to how the work must be done. Someone providing direction will often co-ordinate how the work is done, as it is being undertaken.’
- ‘Control is someone dictating what work a person does and how they go about doing that work. Control also includes someone having the power to move the person from one job to another.’
Affects this could have on contractors and freelancers include:
- Being put off from taking up contracts a long way from their base.
- Having to raise their rates to compensate for the loss in tax relief, although their client may not be willing to accept it.
- Independent professionals will face a huge disadvantage to the very large firms. While large consultancies will still be able to claim the expenses, consultants working through their own company will not.
There is currently a petition against these proposed changes and is available until the 11th March 2016. You can sign up to this here.
Here at Gorilla, you will have your dedicated accountant to provide unlimited support to any queries you may, including any queries regarding the changes, have under our client service guarantee. This is included in our all-inclusive accountancy package and is just £85 + VAT per month. To learn more, get in touch with us on 0330 024 0406.
