The Future of Travel & Subsistence Schemes

The Future of
Travel &
Subsistence
Schemes
Hosted by Rullion Limited
4th
February 2016
Manchester United Football Stadium
In partnership with:

AGENDA
Agenda
09.30 – 10.00 Registration & Refreshments
10.00 – 10.15 Welcome & Introductions
10.15 – 10.30 “What’s it all about?”
Paul Chamberlain, Partner, Head of Employment and Pensions Brabners LLP
10.30 – 10.45 “The Future for Umbrella Companies”
Julian Ball, Legal Director – Paystream
10.45 – 11.00 “What’s on the Horizon?”
Tom Hadley, Director of Policy and Professional Services Recruitment & Employment
Confederation (REC)
11.00 – 11.50 Panel Q&A – Panellists:
Andrew Moore, Associate – Eversheds LLP
Damian Houghton, Founder & Owner - Danbro
Paul Chamberlain, Partner, Head of Employment & Pensions – Brabners LLP
Julian Ball, Legal Director – Paystream
Tom Hadley, Director of Policy and Professional Services – REC
11.50 – 12.00 Next Steps
12.00 – 12.40 Lunch & Networking
12.40 – 13.50 Stadium Tour (Optional)
14.00 Close

The Future of Travel and
Subsistence Schemes
Paul Chamberlain- Partner, Head of Employment
Thursday 4 February 2016

What is it all about?
What problems are the Revenue trying to resolve?
Current Travel and Subsistence arrangements:
•Relief is available for travel in the performance of a worker’s duties or
for travel between a worker’s home and a ‘temporary workplace’
•Intermediaries employ workers on an overarching contract on a single
set of terms and conditions whilst they work in multiple locations for
different engagers. The worker is treated as being in single continuing
employment. The workplaces will often be temporary
•A worker employed in this manner is eligible for tax relief on their
home to work travel and subsistence expenses that a direct employee
cannot access

• Increasing numbers of workers are eligible for relief
• Use now exceeds the original intention of Parliament
• Estimated taxpayer cost of £265 million
• Market distortions and unintended tax advantages

The Consultation Exercise
Consultation Period (8 July 2015- 30 September 2015)
“If a worker is:
•Supplying personal services;
•Working through an employment intermediary, i.e. an umbrella company, a personal
service company or in certain circumstances an employment business;
•Subject to (or to the right of) the supervision, direction or control of any person in the
manner in which they provide their services;
then each engagement will be treated as a separate employment for purposes of tax
relief for travel and subsistence (T&S).”
HMRC (Consultation Document 8 July 2015)

Employment Intermediaries
•Employment Intermediaries will be defined as:
•An entity- including a company, partnership or an individual;
•Which interposes itself between a worker and an engager, as part of
an arrangement for the worker to provide services to the engager; and,
•Substantially in the supply of labour services

Supervision, Direction or Control
Any party to the arrangements must have (or have the right of) supervision,
direction or control over the manner in which the worker provides their
services
•The worker can be subject to supervision direction or control from any
person for the changes to apply
•The right of supervision, direction or control does not need to be exercised
in practice for the changes to apply
To determine supervision, direction or control HMRC will consider the
worker’s arrangements overall, including how work is carried out in
practice. It will not be sufficient for the terms of engagement to imply a lack
of supervision

“Although the government recognises that supervision, direction or control is a subjective test,
and that a minority of engagements will be hard to categorise, it believes that clear guidance
should help ensure businesses and individuals are able to understand when a worker is under
the right of supervision, direction or control in the manner they undertake their work. There is
already a substantial amount of case law in this area, which will further support HMRC’s
guidance and the understanding of these terms. HMRC will review the existing guidance on
supervision, direction or control and issue guidance for this measure before it comes into force
in 2016.
The government is also confident that its current definition of the terms will capture those
whose work is akin to employees, without affecting those who are akin to the self-employed.
The government considers that with clear guidance on these definitions, it will be easier to
understand where someone is not under supervision, direction or control.
It is important to note that the supervision, direction or control test being proposed for use by
employment intermediaries in relation to these changes, will only be relevant for deciding
eligibility for relief on travel and subsistence for home to work travel. It will not impact on a
worker’s employment status, or wider employment rights.”
HMRC (Summary of Responses 9 December 2015)

Example 1- Working through an employment intermediary following the proposed changes
An independent retailer requires their own website to market and sell their products online. The
proprietor contracts with an employment agency to supply them with an IT consultant to design, build
and release the website on-line.
An IT consultant is sent along to meet the proprietor, who explains their requirements. Having no
expertise in IT, the proprietor gives the IT consultant photographs of the product range and the price
list and tells the IT consultant they have a free reign to undertake the work as they choose. The IT
consultant works at the retailer’s premises during the engagement and completes the job after which
the engagement ceases.
In this example, the proprietor had no right of supervision, direction or control over the manner in
which the IT consultant provided their services. As such, the IT consultant is able to claim tax free
travel and subsistence expenses for their travelling between home and the retailer’s premises and for
lunch costs, regardless of whether they work through an Employment Intermediary, including a PSC
or an Umbrella Company.

Example 2 – Working through an employment intermediary following the proposed changes
A local authority need an IT consultant to provide 4 months cover for a permanent employee who is
on maternity leave. The local authority contract with an employment agency to send along an IT
consultant to provide the cover.
The job entails the IT consultant working within the local authorities own IT department alongside
permanent employees, undertaking the same duties. Throughout the engagement the manager of the
IT Department assigns the work to the IT consultant and gives instructions as to how that work must
be done. The IT manager monitors the IT consultant’s work, as they do with the permanent
employees work.
In this example the IT manager had a right to supervise, direct and control the manner in which the IT
consultant provided their services and that right was exercised. Therefore, the IT consultant is not
able to claim tax free travel and subsistence expenses for travel between home and the local
authority’s premises and lunch costs. The local authority’s premises is regarded as the IT consultant’s
permanent workplace for the duration of the engagement

Where does the liability sit?
“Having considered stakeholder views, the government believes the most
pragmatic and proportionate approach to improving compliance is the
option raised during consultation roundtable events. This option transfers,
jointly and severally, any debt arising from the deliberate misapplication of
the rules from the employment intermediary (the business employing the
worker) to its director(s). The transfer of debt would only be applied where
it could be shown that the employment intermediary had knowing failed to
apply the rules correctly, when they had been told by the engager that relief
on travel and subsistence should not be available.
In addition, a second transfer of liability will also be introduced, moving
debt to another relevant party where they have provided a fraudulent
document that misled the employment intermediary so that relief on travel
and subsistence expenses was allowed.”
HMRC (Summary of Responses 9 December 2015)

Where does the liability sit?
• It was expected that the draft legislation would include a principle for
transfer of debt to the agency.
• However, a transfer of debt principle was not included. It is possible
that this could change.

In what circumstances can T&S
tax relief still apply?
• Personal Service Company (PSC) workers who are outside of the
IR35 legislation (ss48-61 ITEPA) (If T&S conditions are met)
• PSC workers who are inside IR35, but are not under supervision,
direction or control in the manner that their work is undertaken (and
are therefore akin to those who are self-employed)
• Therefore consider: 1- IR35, 2- supervision, direction or control

Travel and Subsistence
Timetable
•Consultation period (8 July- 30 September 2015)
•Autumn Statement (25 November 2015)
•Summary of proposals published 9 December 2015
•Draft legislation published 9 December 2015
•Expected implementation on 6 April 2016 through Finance Bill 2016

Any Questions?
Website: www.brabners.com
Email: paul.chamberlain@brabners.com

PayStream - The Accountancy ServicePayStream - The Accountancy Service
ProviderProvider
T&S changes
04.02.16

Working with Rullion
• PayStream have an 8 year relationship with Rullion
• 88 umbrella and 173 PSC workers
• Dedicated account managers – Rob Gillman (North), Chris Fahey (Scotland),
Hannah Mollison (South), Miguel Cunha (South)
• 79% of umbrella workers claim expenses
All Rullion contractors that completed our Customer Survey advised:
• that they find the PSC Dashboard and income statements useful;
• that PayStream is better than other umbrella providers they have used;
• that they are satisfied with our Customer Care Team;
• that on a scale of 0 – 10, when asked how likely they were to recommend
PayStream to a friend or colleague, they scored PayStream 9 for both PSC and
Umbrella.

Potential Services FY16/17
• No expense umbrella - works, retains continuity of employment but margins lower
• Traditional umbrella – works but SDC and Salary sacrifice rules will apply
o Fixed expense umbrella – does not breach salary sacrifice BUT need
evidence no SDC. Also need to justify size of claim to HMRC.
o Mileage only umbrella – does not breach salary sacrifice BUT need evidence
no SDC. Can make claim for mileage but will have to do a tax return to reclaim
subsistence.
• PSC – IR35 applies
• PSC Deemed – option for career contractors deemed to be inside of IR35
• CIS – if no SDC
• PayStream Plus – full suite of back office accountancy and payroll services

Why aren’t PSCs affected?
• PSCs will be excluded from the SDC test – “too complicated to have 2 tests” - IR35 will apply to
T&S expenses
• Inside IR35 - no T&S allowed; Outside IR35 - T&S allowed
• Liability remains with PSC (because PSC intermediary)
• PSCs will continue in their current form although there will be an increased focus on IR35
reviews
• In-house IR35 team advantageous – we offer 90 reviews per week
• Those operating "inside IR35" PSC solutions will need to review their expenses policies

Will there be a switch to PSC?
Maybe but consider:
•Is it right for worker? Rate (£16+), job title, contract length, risk appetite, IR35
•Anti- avoidance provisions – S339A (5) – no regard to arrangements to get round legislation
•Benefits of umbrella - Continuous employment, statutory benefits, insurance, non-T&S expenses
(mobile), Independent Financial Advisor access, advances.
•Reputational risk – employee today self-employed tomorrow
•MSC risk – mitigated if accountant not “involved”
Benefits
•Reduces AWR risk
•T&S risk with PSC (unless scheme)
•Increases takes home pay
Communication
•Needs careful handling
NOTE: we are not advocating wholesale switch

Should we allow expenses to be processed?
• It will increase workers’ pay and retain mobility - £30/wk net difference
• To be robust we will need to confirm no SDC
• Simple questionnaire could be used
• Evidence must be saved
• If fraudulent answers are given it will lead to potential liability for agencies/clients
• HMRC to provide examples of what / what is not caught – April 2016

Could a “Statement of Work” Model work?
• Provide a service not a man so new legislation wouldn’t apply - no “personal service”
• Can work where defined deliverables
• T&S would still be allowed
• Contracts would need to change – all need to be on same page
• Not a solution for every worker
• Could possibly subcontract to PSCs or sole traders in this model

Communication plan
• Historical – email to contractors and article on website re potential changes
• Press/external – articles submitted to RI; PRISM releases; submissions to MPs
• Next communication – end Feb planned; reminder in March – note final legislation
to be published 16th
March
• Partnership – need to understand Rullion and clients’ position so no conflicting
messages

Tom Hadley, Director of Policy &
Professional Services, REC

www.rec.uk.coment and Employment Confederation
which is why we are building the best recruitment industry in the w
3,500 members covering 19 specialist
sector groups
All members must sign up to the
Code of Professional Practice and
pass mandatory compliance test
Individuals can become members of
the Institute of Recruitment
Professionals (IRP)
We are… The professional body for the
UK recruitment industry

Who we work with…

1 –The jobs market context

• Number of placements have increased for 38
consecutive months (Report on Jobs);
• Number of shortage roles has gone from 31 in
Jan 2013 to 73;
• Demand is strong across most sectors and
regions;
• Strong demand is driving salary growth.

2 –The political context

The political context…
• Review of T&S schemes is part of a broader
focus on tax avoidance
• Latent suspicions of different (i.e. non
permanent) ways of working

The political context…

Not just a UK issue…

So, where are we now?
• Over the last 10 years there has been a proliferation of
workers using T&S schemes through umbrella companies;
• HMRC have estimated to cost the exchequer to be
somewhere around £265 million;
• As part of wider measures to tackle tax avoidance and level
the playing field for tax and NICs to correct market distortion
the Chancellor announced a crackdown on T&S Tax Relief in
the Autumn Statement in 2014 leading to an initial discussion
document that closed in Feb 2015;
• This found that many temporary workers were using T&S tax
relief for home to work commuting which is prohibited in tax
law;
• This lead to the final consultation to introduce the test of
supervision, direction and control and to the subsequent
draft legalisation.

3 –The practical implications

Practical implications …
• If the individual works “outside” IR35 there is no need to apply the SDC test (i.e. can
claim T&S expenses relief). IR35 is the responsibility of the intermediary (i.e. the PSC or
partnership) so risk here is incorrect application of IR35 rules.
• There will be a review of IR35 this year, with new rules potentially in place by April
2017. We will need to keep a close on developments here and influence where
possible.
• Will we see a mass migration into PSCs or other intermediary types? How are workers
responding to the changes?
• What due diligence should the employment business do on PSCs, partnerships etc.?

Practical implications …
• Implications for different sectors - e.g. mobile workers such as district nurses, care
workers, drivers – no T&S relief for journey from home to permanent workplace (and
back) but relief is available for assignment to assignment journeys. (Question to
HMRC: what about those workers who do not travel to a permanent workplace each
morning but start (and finish) at a different location each day?)
• With regards to liability, what is a fraudulent document? (Criminal intent versus
misleading or simply wrong).
• In complex supply chains, which employment intermediary can liability transfer to and
what due diligence should the employment business do?
• SDC not defined in legislation so we rely on guidance. We have asked for guidance to
be improved and merged. We are submitting scenarios to HMRC.

Issues for our members
• Move temporary workers back onto employment business’s own payroll?
• Continue relationships with existing umbrella company suppliers?
• Alternative supply models – how else can they supply temporary workers?
• Members must be aware of “arrangements” and general anti-avoidance rule.
• Potential impact on pay rates?

Implications for supply chains

I - What’s going on?
Challenging preconceptions …

Working together to implement changes

Charter Principles
1. Our recruitment procedures are fair, legal and ethical
2. We will exercise recruitment good practice despite mode of employment
3. The candidate experience delivered is of a high standard
4. Flexible working arrangements and adaptive working packages
5. Those managing and delivering the recruitment process having undertaken
any relevant training/qualification
6. External recruitment providers are signed up to industry Codes of Practice
7. Recruitment good practice is ensured throughout the supply chain
8. Recruitment procedures help to address the challenge of youth
unemployment
9. Recruitment procedures are regularly reviewed and feedback sought from
candidates
10. That we ensure we keep abreast of trends and recruitment practices

Final thoughts…

Questions & Answers
Q&A
Paul Chamberlain
Brabners LLP
Andrew Moore
Eversheds
Tom Hadley
REC
Julian Ball
Paystream
Damien Broughton
Danbro

NEXT
STEPS
Rullion
meet/discuss
with Customers
NEXT STEPS
Rullion
meet/discuss with
Umbrella
companies
Develop
communication
plan
Rullion inform
affected
contractors
Umbrella providers
engage with
contractors
Implement
appropriate
solution for
contractor
GO LIVE
6th
April 2016

The Future of Travel & Subsistence Schemes

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