Anne Redston, Chairman of Personal Taxes s/c, CIOT, Tel: 020 7951 2215
Viv Rees: Press Office Tel: 020 7235 9381; mobile 07900 220 887
Bianca Marsden: Head of Technical Department, CIOT Tel: 020 7235 9381; mobile 07860 485686
Contractors who work through Personal Service Companies (PSCs) could lose out on travel costs unless a change is made to rules that come into effect from 6 April 2002, the Chartered Institute of Taxation warned.
The revised system of Inland Revenue “authorised mileage rates” allows employees to claim a fixed amount per mile travelled on business. However, this new system does not work for those with PSCs as it is not compatible with the “IR35” rules, which have operated for PSC users since April 2000. Unless a change is made, contractors operating through PSCs will not obtain tax relief for their business mileage and will thus be at a disadvantage compared with employees.
Anne Redston, Chair of the Personal Taxes Sub-committee of the Chartered Institute of Taxation, said:
“We have brought this apparent error to the Revenue’s attention and have discussed it with them. We are confident that they understand the problem and trust that these rules will be amended, so that contractors can continue to claim their travel expenses as at present.”
The CIOT hopes that the system will be adjusted in the forthcoming Budget but awaits confirmation. In the meantime the CIOT feels, as the Budget falls after the start of the next tax year and thus the commencement of these new rules, that its members and contractors generally, need to be aware of the problem.
Anne Redston continued:
“We would be surprised if there was a change of policy in this area, because the Paymaster General has in the past said that those with personal service companies will be able to claim business travel expenses. It will be appreciated that contractors frequently travel considerable distances in order to respond flexibly to their work opportunities so any withdrawal of tax relief on business travel would be very expensive for them.”
Ends
25 February 2002
Technical Department
020 7235 9381
