APSCo responds to publication of Finance Bill 2016
Responding to yesterday’s publication of the 2016 Finance Bill, Samantha Hurley, head of external relations & compliance at The Association of Professional Staffing Companies (APSCo), said:
“We were very pleased that there has been no change in IR35 legislation and we expect to see a consultation during next year with any changes coming into effect in April 2017. APSCo will be attending the IR35 Forum next week to ascertain the government’s intentions.
“The announcement on travel and subsistence relief for workers providing services through intermediaries was largely as we expected in that individuals working through umbrella companies will no longer be eligible for tax relief on their expenses unless they can pass a test of being genuinely self-employed. As expected, the rather simplistic – and in our view flawed - ‘supervision, direction or control’ test will be used which will obviously impact the umbrella sector, particularly in regulated sectors where it will be nigh on impossible to pass this test.
“What this really means for umbrella workers is even if they are, in effect, working as a self-employed individual, professionals in sectors such as Government (particularly in defence), financial services, and anyone providing services to a regulated business (e.g. the pharmaceutical, aerospace and nuclear industries) will no longer be able to claim tax relief on their expenses. This change will no doubt have a significant effect on these regulated sectors, and on the more remote geographical locations, where businesses will find it much more difficult to attract the professional talent they need to fulfil their project work.
“However, in respect of those working through Personal Services Companies, it is better news as the Government has confirmed that it will align the claiming of travel and subsistence relief with their IR35 status. In other words if they are outside IR35 they can claim and if they are inside they can’t. Consequently the supervision direction and control test will not apply. It is important to remember however, that IR35 is assignment based and so everything will depend on a worker’s status for that particular assignment.
“It is likely that in some sectors, this legislation will drive contractors away from the umbrella model into operating through Personal Service Companies – which will not always be appropriate. APSCo recommends that contractors are not encouraged by intermediaries to move away from the umbrella company model as this could look like tax avoidance and it is important that contractors make their own decisions about which supply model to use.
“We are pleased that the Government has not gone down the route of passing liability to the end client or recruitment firm but to the employer providing the tax relief. Recruitment firms or end clients will only be liable for taxes incorrectly not paid if they provide a fraudulent document intended to mislead, which states that there is no supervision direction or control. For umbrella companies we are pleased that the Government has included the fraudulent document defence - that where a client or other relevant person tries to mislead an intermediary, and it subsequently allows the tax relief in good faith, it is clearly not fair for them to be penalised. A similar defence was added to the onshore intermediaries legalisation last year due to extensive lobbying efforts by APSCo.”