HMRC to rewrite new contractor legislation

The HMRC has recently admitted to getting the wording wrong in new travel and subsistence legislation for contractors and will have to rewrite it.

From 6 April this year, access to travel and subsistence relief was restricted for contractors working through employment intermediaries. Those subject to the right of ‘supervision, direction or control’ (SDC) by anyone they worked with would miss out on tax relief.

However, the SDC test for intermediaries was unexpectedly replaced with the test for IR35. HMRC has admitted getting the wording wrong in the new legislation and will have to rewrite it.

The error has been criticised by the contracting sector, with tax experts claiming it highlighted a chaotic and overly complex tax system that was in desperate need of simplification. The need to amend the legislation emerged in correspondence sent to industry figures last week, as employment intermediary trade body PRISM made calls for a strategic review.

Paul Hughes, an executive member of PRISM, said he pointed out the error soon after the Finance Bill was released.

He revealed: “The Finance Bill 2016 is currently making its way through Parliament and it was hoped that with clear guidance intermediaries, PSC and umbrella could move forward with a degree of certainty. Having been widely criticised for the appalling amended guidance, it now seems that HMRC cannot even write the legislation to align with Parliament’s wishes.”

Crawford Temple, CEO of PRISM, added: “There is so much complexity in employment legislation and so many different tests that the people who write our laws cannot even get it right first time. What chance has the ordinary man and woman got who are not tax experts but nurses, engineers, teachers, construction workers and IT experts? This is proof if any were needed that PRISM’s proposed strategic review, backed by 55 cross-party Parliamentarians and a Commons intervention by a major opposition party, is long overdue.

“UK workers are classed officially as either self-employed or employed. The truth is there is a third way of working and contractors are losing patience waiting for government to play catch up.”