Employment Intermediaries – Travel and Subsistence (Part 1)

Having read the recently issued consultation document it seems that HMRC believe that they have a silver bullet in the application of control, direction and supervision (CDS) when applying this test to contractors and temporary workers.

As an employment status indicator then if you are CDS then you are treated for tax purposes as an employed earner. However, it seems illogical to use the same test to deny employees travel and subsistence costs, unless CDS doesn’t apply which means that you are self-employed.

We now face the real prospect that may of our key contracting sectors, IT, Engineering, Pharmaceutical, Construction, Power and Energy, Ship Building and Fabrication will be faced with increased costs when utilising itinerant workers sourced locally or from further afield, with some of these sectors in the Northern Power House already struggling to be competitive in competing internationally then you do wonder whether many industries may seek to relocate to the more favorable regimes in Norway and the Netherlands that seem to understand that British workers are a valuable resource they would like to utilise.

We must seek to educate those that we have elected in to power that these workers are unique in that as they generally are project based or as HMRC put it are working on a task of limited duration, they are precisely the types of workers the rules had been changed in 1998 to benefit. They may or may not be under the Control, Direction or Supervision of someone, but it is not the easiest test to apply and any test that relies upon case law for its definition will leave many within the supply chain uncertain as to whether they are making the correct decision.

Whilst the above groups should be protected from any rule amendments, it is clear that if someone looks like an employee then they should be treated as attending a permanent workplace, even if they are only there for a temporary purpose.

Workers in Health, Teaching, Local Authorities, Call Centre Staff and Warehousemen it is clear had never been the intended beneficiaries to the rule change in 1998. As HMRC state in their consultation it was never Parliaments intention to allow all temporary workers to claim for travel to and from site. However, it was Parliaments intention to allow site based workers to claim relief that they had previously been denied. Here is what HMRC said in the December 1997 Tax Bulletin 32 “Most employees have a permanent workplace, and most employees have only one permanent workplace. But there are some employees who have nowhere that they attend regularly other than to perform tasks of limited duration or for some other temporary purpose.

Many site based employees are in this position. They do not have a permanent workplace. This means that they do not have an ordinary commuting journey, so from 6 April 1998 they are entitled to all journeys from home to the temporary workplace they have to attend to perform the duties of their employment.” It is interesting to note that as most temporary workers do not attend site to perform a task of limited duration then they should have been denied relief under the existing legislation as they did not attend for a temporary purpose, which it seems was meant to be for a self- contained reason. Tax Bulletin 32 and 33 can be found in the National Archive.

So do we need an extra layer of legislation to ensure that the rules are now correctly applied?

The answer seems to be yes, until there is a re-write of the rules, but it should be written to ensure that the CDS test is only applicable to the temporary purpose part of the test, leaving those that choose to operate through a PSC or an Intermediary and are performing a task of limited duration.

One final observation to leave you with on how the consultation could lead to a new unfairness the result of two workers working on the same site. Worker 1 is a supervisor directly employed by construction company A who he has worked for many years on projects up and down the UK, he never attends head office. His employer reimburses him the cost of his accommodation, travel and subsistence tax free as he is directly employed. Worker 2 during the course of the year works on numerous sites for many clients, he is brought in to perform a task of limited duration and is supervised, directed and controlled by worker 1. His Umbrella Company invoices for his time and expenses that are billed to the end user client. These expenses, it seems would now be subject to Income Tax, Employers and Employees National Insurance.

Article wrote by Paul Hughes, I-Paye http://www.i-paye.com/

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