From the 6th of April 2016, in order to pay a contractor travel and subsistence expenses free of Tax and National Insurance, staffing businesses and employment intermediaries have to show that there is no supervision, direction or control (SDC) over a worker “in the manner in which they go about their work”. HM Revenue and Customs (HMRC) will test by examining relevant documents and gathering facts from all parties involved, and if HMRC considers the evidence is unsatisfactory they will recover PAYE and NICs due from the employment intermediary that paid the contractor. With this in mind, since the change in legislation, a number of contractors will start to see a decrease in their NET take home pay.
Although contractors can no longer claim for their expenses on a weekly or monthly basis as they used to, they are still able to apply to complete a P87 or Self-Assessment by October 5th. This will be assessed by HMRC once filed and if approved a contractor will receive extra relief in the way of an increased tax code.
If however a contractor falls outside of SDC they are still able to claim expenses free of tax and National Insurance. There are restrictions on the expenses that a contractor is able to claim as travel to and from work is no longer allowable but travel between assignments or whilst on assignment is. They will also need a receipt for each and every expense that is claimed for. To decipher whether or not a contractor falls outside of SDC we can complete an SDC Self-Assessment over the phone and assess them on an individual basis.
Once satisfied that a contractor does fall outside of SDC, they then have the option of claiming for their expenses in one of two ways; Fixed Expense Pot or Mileage Only by submitting mileage and receipts to us weekly. What must be remembered when claiming for expenses is that they are only claimable if wholly, exclusively and necessary for the purpose of the current role.
At ePayMe we are able to offer a number of fully compliant payroll solutions to suit the needs of you, the agency, and your workforce. Whether this be your standard umbrella product with no expenses for those that fall inside SDC, Bureau and Back Office, or our Hybrid solution that brings you the best of both worlds, we are sure to have you covered.
For information or guidance on any of the above please contact us on 01252 863700 or info@epayme.co.uk where one of our experienced representatives will be happy to assist you.