giant group responds to Finance Bill 2016
giant group has responded to the Finance Bill 2016, which was published by the HMRC following the November budget.
giant group said the following.
The Bill included changes to the eligibility for contractors to claim travel and subsistence expenses, but it had no information on any expected changes to IR35, following the IR35 discussion document earlier in the year.
Contractors employed by an agency or umbrella company will not be allowed to claim travel and subsistence if they are caught by the supervision, direction or control test.
At giant, 55–60% of contractors do not make any expense claims. The changes will therefore only affect the minority and most of these are professional contractors who will be able to demonstrate that there is no supervision, direction or control over them and therefore continue to claim travel and subsistence.
The introduction of debt transfer to the directors of umbrella companies will, giant hope, act as enough of a deterrent to stamp out sharp practice amongst a small number of umbrella companies. Going forward, umbrella firms will continue to play a very important role in the supply chain for hirers, agencies and contractors. The financially strong and compliant umbrella companies will continue to evolve and provide new benefits to contractors.
PSC contractors will be largely unaffected by the changes to travel and subsistence because if they are outside IR35 they can continue to claim them. Giant claim that this is where there is an anomaly. The group has a supervision, direction or control test for employed umbrella contractors and an IR35 test for PSC contractors. Both tests allow for the eligibility to claim travel and subsistence expenses however, the IR35 test is not as broad as the supervision, direction or control test and is therefore arguably easier to "pass". To close the anomaly, giant say, HMRC would need to change the IR35 test to also be based on supervision, direction or control. After the IR35 discussion document earlier in the year, it is expected that there will be a consultation document detailing how to achieve this. What will be important is the debt transfer provisions, which accompany it, because these are the provisions that absolutely dictate the behaviours in the supply chain. In the meantime, there is a raft of anti-avoidance legislation to stop contractors being 'pushed' into PSCs. Until the anomaly is closed, however, HMRC will not meet their tax targets which was the whole basis for any changes in the first place.
The good news is that after all these changes are law there will be very little left for HMRC to change and the market can enjoy a well-deserved period of stability.