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NumberMill publishes Finance Bill update

Following the Finance Bill 2016 being published on 24th March, NumberMill has released an update.


The company says the final version of the legislation is somewhat different to the draft that was published back in December 2015. Some of the amendments included within the National Insurance Legislation have been mirrored in the release on Thursday, along with a couple of technical changes.


NumberMill states that the initial review of the latest Finance Bill shows that:


  • The effect of the legislation is as predicted – travel and subsistence costs where there is a single site engagement for the end user will not qualify for tax relief; however, where the worker is travelling to more than one site as part of the engagement for the same end-user then the normal ‘temporary workplace’ rules will apply and relief may still be available
  • PSCs are subject to the IR35 test and not the supervision, direction and control test (this reflects the HMRC guidance but was not achieved by the original legislation)
  • PSCs not caught by IR35 are outside of the restrictions and can claim travelling and subsistence relief as per the existing rules (although they may still be caught by the separate salary sacrifice provisions)
  • There is a new condition, however, that the PSC must not be a ‘managed service company’
  • There is a new wider definition of a ‘managed service company’ specifically for this provision
  • The new wide definition does not allow for the usual exemption that all the income paid to the worker is employment income
  • Essentially this is likely to mean that any accountancy service provider must merely be providing legal and accounting services in a professional capacity to the PSC – providers too closely involved with PSCs will fall foul of this test


There have also been some changes to the debt transfer rules, according to NumberMill:


  • The liability for PAYE is with the employment intermediary by default (e.g. the PSC or umbrella company)
  • Fraudulent documents from the client relating to a lack of SDC will expose the client to PAYE debt transfer, as was originally drafted
  • Directors of PSCs caught by IR35 will be exposed to personal debt transfer if they do not operate PAYE correctly on expenses
  • The debt transfer rules for directors of umbrella companies have been widened: if the legislation is not applied due to a claimed lack of SDC there must be evidence from which to infer a lack of SDC that is ‘reasonable in all the circumstances’ – and a mere assertion is insufficient
  • It appears that HMRC have added a provision to the MSC debt transfer legislation specifically for the purposes of these new rules.  Although the addition is not sufficient on its own and requires further secondary legislation, it has clearly been added for the purpose of transferring debts to third parties where the new wider MSC definition applies.  We believe there will be further legislation to come – watch this space.


NumberMill has also given an update on false self-employment. The company commented, “On a separate (but relevant) issue, it has come to our attention that HMRC are starting to write to agencies regarding the quarterly intermediary reports that have been submitted under the Onshore Intermediaries: False Self-Employment legislation. The correspondence warns that HMRC have noticed from the quarterly reports that the agency is engaging self-employed operatives, and asks agencies to make sure they review any self-employed engagements within 14 days and operate PAYE unless they can comply with the rules. This is an unsurprising development considering the many changes ahead in the sector, and it is likely to be one of the areas of HMRC scrutiny in the months ahead.


“These letters are a stark reminder that any agencies who are using intermediaries to engage self-employed individuals must ensure that their house is in order – this means making sure contracts and procedures are watertight and comply with the SDC test. 


“NumberMill continue to be committed to transparency and compliance and ensuring that our services remain compliant.  Don’t trust partners who are not up to date, nor take the time and investment to keep abreast of legislation.”


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