The Government are implementing two changes to the Income Tax (Earnings and Pensions) Act 2003 (ITEPA). The first, section 289, was enacted as part of Finance Act 2015. It imposes the rule that an employee’s gross salary cannot be varied according to the value of specified expenses. The specified expenses are those included within Chapter 2 and Chapter 5 of Part 5, ITEPA. In effect, this removes your entitlement to claim tax relief on the vast majority of the business expenses you currently enjoy as tax allowable, other than by direct application to HMRC via a Self-assessment Tax Return.
The second amendment is proposed section 339A ITEPA and forms part of Finance Bill 2016. With respect to Umbrella employees, s.339A imposes a new test. If someone is caught by the new test, a further restriction is enforced for travel and subsistence expenses. Umbrella employees who are subject to the right of supervision, direction or control of any party within the temporary supply chain will be obliged to treat each engagement as a separate employment. Each assignment will therefore have to have a permanent workplace and therefore travel and subsistence expenses incurred between their home and the permanent workplace will not be tax allowable.