Are you under direct control and supervision?

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In the Summer budget of 2015 the Government proposed to restrict tax relief on travel and subsistence for workers who were engaged through an intermediary, which could include ‘Personal Services Companies’. This meant that tax relief could be removed for workers who were subject to supervision, direction or control of any person involved in the engagement.

HMRC consider the definition of the 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.

This initially caused a great deal of concern amongst the contractor community, however in the Autumn 2015 statement it was announced that changes to tax relief on travel and subsistence will not affect so-called ‘Personal Service Companies’, unless IR35 applies.

What does this mean?

This effectively means that you will rightfully be able to continue to claim the tax relief, as you are outside of IR35, right?

In summary, the rules on Travel and Subsistence are closely aligned to IR35 – if the engagement is not IR35 caught, then you are entitled to claim. If the engagement is IR35 caught, then relief is not available.

The relevant sections of the Finance Bill can be found here. Section 339a of this guidance document covers the legislation relating to those operate through their own limited company.

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