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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Travel expenses: travel for necessary attendance: Employment intermediaries

An employment intermediary is an entity which sits between a worker and client as part of the arrangements under which the worker personally provides services to the client. In these circumstances the worker isn’t working under a direct contract between themselves and the client (or a person connected with the client) but is working under arrangements involving the employment intermediary.

Sections 338 and 339 ITEPA 2003

Prior to 6 April 2016, it was not uncommon for an individual who would be an employee if engaged directly by a client to provide his or her services through an intermediary such as a personal service company. In a typical arrangement the service company would employ the individual and contract to supply his or her services to the client. This arrangement created certain tax and NICs advantages that are tackled by the intermediaries legislation, see ESM3012 onwards.

Where the individual was continuously employed by the service company and undertook contracts for clients of the service company in different places, he or she would commonly have been able to deduct the cost of travelling to and from the client’s premises. This was because the client’s premises could be treated as a temporary workplace provided that the individual did not expect to be there for a period of continuous work exceeding 24 months, see EIM32080. The contracts between the service company and the client were not treated as separate fixed term appointments of the individual. This treatment is not affected by the intermediaries legislation, see ESM3224.

This is illustrated by the first example in EIM32136.

The individual may also have carried out some part of his or her duties at home as well as working at client’s premises. The guidance at EIM32170 explains the effect of accepting that the individual’s home is a workplace. Guidance on how to determine whether the home is a workplace is at EIM32760 onwards and this is applied to service companies at EIM32800.

Section 339A ITEPA 2003

From 6 April 2016, section 339A has been introduced into ITEPA. This sets out the new tax provisions for the treatment of travel and subsistence expenses for workers who personally provide services through ‘employment intermediaries’.

The new tax provisions for the treatment of travel and subsistence expenses for workers who personally provide services through ‘employment intermediaries’ apply. The employment intermediaries travel expense provisions mean that each engagement undertaken by a worker who personally provides their services through an employment intermediary will be considered a separate employment for the purposes of travel and subsistence. This will mean that generally no relief will be given for home-to-work travel costs and associated subsistence. Detailed guidance on the employment intermediaries travel expense provisions can be found in the Employment Status Manual at ESM5500.

The changes affect workers personally providing services to clients through an ‘employment intermediary’ which could be:

  • an agency
  • a recruitment or employment business
  • an umbrella company
  • a managed service company (MSC)
  • a personal service company (PSC)

When the employment intermediaries travel expense provisions apply, workers engaged through an ‘employment intermediary’ cannot claim tax relief or a disregard for NICs on the travel and subsistence expenses, such as the cost of lunch or dinner or overnight accommodation, they incur on an ordinary commute from home to work. The employment intermediaries travel expense provisions apply regardless of how workers are remunerated.