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HMRC internal manual

Employment Status Manual

Employment intermediaries travel expense provisions: impact of the employment intermediaries travel expense provisions on a worker’s own PSC (which is not an MSC) and examples

The employment intermediaries travel expense provisions are modified [ESM5580] when a worker provides their personal services through their own employment intermediary which needs to consider and may be subject to the intermediaries legislation [ESM3000]. The most common type of intermediary to which the intermediaries legislation may apply is a PSC. There is no definition of a PSC for tax purposes but they are often small limited companies through which an owner/director provides their own personal services.

The modification doesn’t apply to PSCs which are MSCs within the meaning given by section 61B ITEPA, or would be such a company disregarding ITEPA, section 61B(1)(c) [ESM5570].

Impact on workers operating via PSCs which are not MSCs (nor would be MSCs disregarding section 61B(1)(c) ITEPA)

From 6 April 2016, where the provisions relating to individuals providing their services via employment intermediaries which need to consider the intermediaries legislation apply, those workers who supply their services through their own PSC will need to treat each engagement they undertake as a separate employment for the purposes of travel and subsistence:

  • where they are required to operate the intermediaries’ legislation, or
  • they would otherwise be operating the intermediaries legislation if they weren’t receiving all their remuneration as employment income

 

This brings the treatment of their travel and subsistence expenses in line with that of other temporary workers and contractors, whilst ensuring that those who operate more like the self-employed are able to claim relief for their travel and subsistence expenses.

Example 1 - the intermediaries legislation applies

Jeannette works via her PSC, JB Ltd on a 6-month contract providing interior design services to a luxury hotel chain where she works under the direction of the Head of Procurement.

She’s provided with office space at their largest hotel and goes there every day. She always buys lunch in the hotel restaurant. When she travels to the hotel, she is reimbursed for her travel expenses and for the cost of her lunch as a subsistence expense. The intermediaries legislation applies to the engagement.

The employment intermediaries travel expense provisions apply to Jeannette’s travel and subsistence expense payments because the basic conditions are met and JB Ltd is subject to the intermediaries legislation. She isn’t entitled to tax or NICs relief on her travel expenses. Whether or not Jeannette is subject to SDC doesn’t need to be considered.

Example 2 – the intermediaries legislation would apply but for remuneration being taken as salary

Dean is an IT Consultant who works as a contractor via his own PSC, DG Ltd. He’s the only director and shareholder. He’s providing his personal services through DG Ltd to a trucking company, T Ltd. Dean works as part of a team under the supervision of T Ltd’s IT director.

Dean is required to travel to T Ltd’s main depot at least 3 times a week and when he does is reimbursed his travel expenses to and from home. He takes all the income of the engagement from DG Ltd as his salary. DG Ltd needs to consider the intermediaries legislation.

DG Ltd would be subject to the intermediaries legislation and would need to make a deemed employment payment if Dean did not take all its income from the engagement as his employment income. As such, and because the basic conditions [ESM5530] also apply, his travel expenses are subject to the employment intermediaries travel expense provisions. There’s no tax or NICs relief on his travel expenses for any of these journeys. Whether Dean is subject to SDC does not need to be considered.

Example 3 - the intermediaries legislation considered but doesn’t apply for reasons other than simply the fact that remuneration is taken as salary

Asif works via his own PSC as a draughtsman. In the last year his personal services have been supplied to several multinational companies to work on large engineering projects. Asif takes some of his PSC’s earnings as salary and some as dividends.

Asif’s PSC needs to consider the intermediaries legislation but the circumstances are such that it isn’t subject to the intermediaries legislation for any of its contracts as Asif would not be considered an employee or office-holder when working for clients. Even though the basic conditions are met, the employment intermediaries travel expense provisions don’t apply because Asif’s PSC is not subject to the intermediaries legislation because of the actual arrangements under which he works. This is regardless of whether or not Asif takes some or all of the remuneration his PSC earns from the provision of his services as salary. Whether Asif is under SDC doesn’t need to be considered.