Employment intermediaries travel expense provisions: the basic conditions
Income Tax (Earnings and Pensions) Act 2003 (ITEPA), Part 5, Chapter 2, sections 337 to 339A
Social Security (Contributions) Regulations 2001, Schedule 3, Part 8, paragraphs 3, 3ZA & 3ZB
From 6 April 2016, the employment intermediaries travel expense provisions apply when a worker:
personally provides services to another person (the client) which are not excluded services [ESM5540], and
the services are provided, not under a contract directly between the client and the worker, but under arrangements involving an ‘employment intermediary’. [ESM5550]
Subject to the exception and the modification below, when both the conditions above apply the services the worker provides at each engagement will be treated as a separate employment for the purposes of the travel expenses rules in both of the following:
- sections 338, 339 and 339A of ITEPA, and
- the corresponding NICs disregard in the Social Security (Contributions) Regulations 2001, Schedule 3, Part 8, paragraphs 3, 3ZA and 3ZB
In effect, this means that when applying the travel expenses rules, a worker engaged through an employment intermediary will be treated in the same way as they would be if they were engaged directly.
The rules for ordinary commuting in section 338 of ITEPA haven’t changed. A worker can’t claim tax relief on the cost of ordinary commuting (in general, home-to-work travel and subsistence expenses). Neither can a secondary contributor disregard from earnings any payments of, or contributions towards, expenses incurred in ordinary commuting. A journey that is essentially the same as ordinary commuting will be treated in the same way as any other ordinary commuting journey, so that:
- a worker employed through an employment intermediary [ESM5550] can’t turn an ordinary commuting journey into a business journey simply by arranging a business appointment along the way
- an engager can’t turn an ordinary commuting journey into a business journey by requiring the worker to stop off on the way to carry out a business task, such as making a telephone call
There is an exception to the general provisions above, where the manner in which the worker personally provides their services is not subject to (or to the right of) the supervision, direction or control of any person [ESM5560]. If that’s the case, then the employment intermediaries travel expense provisions don’t apply.
There’s a modification [ESM5580] for workers providing their personal services through employment intermediaries which are required to consider the intermediaries legislation [ESM3000]. This applies whether or not the intermediary is subject to the intermediaries legislation. HMRC considers that this modification can apply when a worker provides their personal services via a PSC. For NICs purposes, the modification applies in a different way for the period 6 April 2016 to 5 July 2016. However, from the 6 July 2016, the NICs position will be fully aligned with income by virtue of SI 2016/647.
However, this modification doesn’t apply in any circumstances if the employment intermediary is an MSC within the meaning of section 61B ITEPA [ESM3500] or would be an MSC if ITEPA, section 61B(1)(c) was disregarded [ESM5570]. In these cases the test to be considered is whether the manner in which the worker personally provides their services is not subject to (or to the right of) SDC of any person [ESM5560].