(Particularly welcome to those affected by current and potential IR35 reforms)
In 2016, the umbrella industry was seriously affected by HMRC new rules.
The new rules came in 2 parts;
Rule 1 – The first rule – affecting Salary Sacrifice and the ability to gain tax relief on a weekly basis.
ITEPA 2003 – Section 289 (2) (b) denies an exemption for expenses paid under an arrangement whereby an employees earnings vary with expense reimbursements.
For this reason if the expenses are set at a fixed level and do not vary the earnings then relief can be obtained.
Rule 2 – restricted the claiming of expenses if a worker is under;
SDC – Supervision, Direction & ControlSection 339A denies tax relief for travel and subsistence expenses where a worker;
1) Personally provides services to another person
2) Under arrangements involving an employment intermediary
These rules do not apply if the manner in which the worker provides the services is not subject to SDC.
The majority of umbrella organisations, including ourselves decided that the workload and extra costs in developing contracts, processes and systems were too onerous and as such have steered clear from processing expenses.
With the introduction of extended IR35 reforms, the industry saw a large swing from Personal Service Company contractors in to umbrella, often dictated to by blanket decisions being made by the Public Sector.
It is the expectation that this will happen again in the Private sector with the planned IR35 reforms expected in April 2020.
For this reason NumberMill have taken the decision to invest in legal contracts, system updates and renewed processes to allow us to process expenses within the HMRC rules. As an FCSA Accredited umbrella these have been developed in order to meet the FCSA code.
So the good news is, if your contractors meet the requirements, they can claimfixed expenses which will significantly improve their take home pay.
We at NumberMill will ensure compliance by;
- Issuing a specially developed DocuSign compliant contract
- We will undertake an SDC assessment (providing detailed guidance on SDC status) NB This is different legislation to IR35
- Agree with the contractor the level of fixed expenses (providing a detailed expense guide)
- Facilitate the compliant claiming of the fixed expenses through our state of the art portals
- All contracts are issued automatically by our CRM providing evidence for HMRC
- All discussions are recorded, again providing evidence for HMRC
Types of contractors which are likely to benefit;
- Contractors who previously work via a Personal Service Company who are effected by the IR35 reforms in the public and Private sector
- Contractors who earn more than £11/ hour