Myth 3 – All umbrella with expenses solutions are the same An ‘inside IR35’ status could be an indicator that SDC applies, but that’s all it is. If a PSC contractor is captured by IR35 on a particular assignment, it does not automatically follow that they will be subject to SDC and therefore ineligible for expenses reimbursement when employed by an umbrella. To be absolutely clear, IR35 and SDC are entirely separate pieces of legislation. Wrong! This has been a hot topic recently, due to the new rules on IR35 and off-payroll working in the public sector that have affected thousands of limited company contractors. Myth 2 – Anyone captured by IR35 is automatically subject to SDC This is similar to what happened to CIS and self-employment in 2014 following the introduction of the onshore employment intermediaries legislation. Many umbrellas, including those that are part-owned by large investment funds, see this is an unacceptable level of risk and have therefore stepped away from expenses. It’s true that some umbrellas no longer offer expenses, but this is a commercial decision based on the fact that liability if the SDC rules are misapplied sits with the umbrella.
Wrong! As of 6 th April 2016, HMRC rules state that contractors who are employed by an umbrella company can still have their home-to-site travel & subsistence (T&S) expenses reimbursed if they aren’t supervised, directed or controlled on the assignment in question.Įxpenses relating to travel between sites can still be reimbursed regardless of the contractor’s SDC status, whilst all umbrella employees can seek tax relief on certain incidental expenses through a P87 at the end of the tax year.
Myth 1 – Claiming expenses through an umbrella company is illegal Here we seek to address some of those myths head on by separating fact from fiction. It’s more than a year since legislation regarding supervision, direction or control (SDC) and salary sacrifice changed the rules on expenses for umbrella companies and the contractors they employ.ĭuring that time, several misconceptions surrounding umbrella with expenses have gained traction in the industry, creating confusion and uncertainty.
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