Guide to Finance Bill 2016

This legislation update had major implications for Umbrella PAYE workers

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Dec 8, 2020
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This was a major game-changer for the whole Umbrella industry and how workers claimed expenses, as it restricted access to relief for home to work travel and subsistence where a worker:

  • Personally provides services to another person
  • Is employed through an employment intermediary
  • Is under supervision, direction or control (or the right of) of any person in the manner of how they perform their duties

Employment intermediary will be defined as a person other than the worker or the client, who carries on a business (whether or not with a view to profit and whether or not in conjunction with any other business) of supplying labour.

Where the worker is within the intermediaries legislation this measure will only apply to those contracts where a deemed employment payment is made or would be made if all the individuals remuneration was not being classed as employment income. In these circumstances the SDC test would not be used.

The Impact

Prior to this bill becoming law it was almost a big selling point of Umbrella PAYE that workers were able to claim travel and subsistence expenses against their taxable income. Travel included journeys for work and travel from home to a temp workplace. This would now only be allowed if it could be proved there was no SDC (or the right of) involved per worker, per assignment. Where it did get abused was the fact that certain providers were willing to process claims for things that shouldn’t have been allowable which created non-compliance that HMRC were well aware of. Change was coming.

The Result

It totally changed the landscape of the Umbrella world to the point that there was a fear of whether Umbrella providers would be relevant after 2016, with the ‘main benefit’ gone, or at least a lot harder to get.

However, there was still relevance to what services Umbrella companies offered as an outsource service to agencies and end clients, besides the advantage of employment benefits for temporary workers.

The Solution

Umbrella no-expense model - The only downside was that the majority of workers who were used to claiming expenses would now not be allowed to due to the implications of being caught by the SDC test. This meant less take-home pay because payments would have to be made with no expenses to claim reimbursed against tax/NI.

Umbrella Mileage-only model –If workers were not caught by SDC (or the right of) then they could still benefit from this model if mileage expenses were applicable to them.

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