Travel costs may not be tax free
Currently, if you work through your own company and need to travel to a customer's site to perform a task, you can receive a tax-free reimbursement of the travel costs for that journey. This applies where you expect to, and actually do attend, that customer's site for no more than 24 months.
Permanent employees at the same site can't claim tax-free travel expenses to get to the same place, as their journeys are considered to be 'ordinary commuting' in relation to their normal workplace.
The Government says it wants to 'level the playing field' between temporary workers provided by intermediaries and permanent staff by removing the tax-free travel expenses for certain workers (see below). However, the real reason for acting now is to stop the abuse of the travel and subsistence rules by a minority of employment agencies and umbrella companies.
If the Government's proposals are written into law, from 6 April 2016 contractors working through an 'intermediary' won't be able to receive tax-free travel expenses if all of the following apply:
- The business of the intermediary is substantially a supply of labour
- The worker is subject to the supervision, direction or control of the engager or any other person involved in the contract, or the right of supervision, direction or control exists in the arrangements
- The contract is performed within the UK – tax relief for the costs of travelling to workplaces situated overseas is not affected
One-person companies are considered to be intermediaries for these rules, alongside employment agencies and umbrella companies. However, professional service firms that second staff to clients will be excluded from the new rules. So large management consultancies won't be caught, but a oneman consultancy business may be.
If you can show that any of the conditions above don't apply to your contracts, you will still be able to claim tax-free travel expenses and any associated subsistence costs. We should discuss whether 'supervision, direction or control' will be a factor in the contracts you take up now which are likely to run beyond 6 April 2016.