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Travel and subsistence

What is the T&S legislation and who does it affect?

On 6th April 2016 the Government introduced new legislation which imposed restrictions on a worker's ability to get tax relief on his/her travel and subsistence costs unless it can be shown that the worker is not under the supervision, direction or control (SDC) of either the client, the agency or PayStream in the way he/she carries out work.

This legislation affects all agency and umbrella workers. Those working through personal services companies (PSCs) are not affected providing they fall outside of IR35. HMRC has stated that it will assume that all agency and umbrella workers are subject to SDC unless the agency or umbrella company has gathered evidence to the contrary.

So, if the agency or the umbrella company gather enough evidence to prove to HMRC that there is no SDC, it may still be possible for some umbrella workers to continue to claim mileage expenses to their main temporary site.

Travel and subsistence changes explained

Allow us to explain in further detail what these changes are and how they affect contractors...

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What is supervision, direction and control?

HMRC says supervision is someone overseeing a person doing work, to ensure that person is doing the work they are required to do and it is being done correctly to the required standard. Supervision can also involve helping the person, where appropriate, in order to develop their skills and knowledge.

PayStream note: a client checking, at the end of a job, that it has been carried out properly will not, on its own, amount to supervision.

HMRC says direction is someone making a person do his/her work in a certain way by providing them with instructions, guidance or advice as to how the work must be done. Someone providing direction will often coordinate how the work is done, as it is being undertaken.

PayStream note: if your contractor has an expertise that the client does not, it is unlikely that the client will be able to direct them as to how to do their job.

HMRC says control is someone dictating what work a person does and how they go about doing that work. Control also includes someone having the power to move the person from one job to another.

PayStream note: if your contractors are filling in for a full time employee who is sick or on leave it is likely that they will be subject to SDC.

Important considerations regarding SDC

SDC over where the work is done, what is to be done and when it is to be done does not mean your contractors will necessarily be caught by the legislation; what is important is whether there is SDC over HOW the work is done.

To determine if SDC applies, HMRC will look at:

  • the terms of engagement i.e. what has contractually been agreed;
  • the way the work has been or is actually done.

Umbrella models

The ‘SDC’ test is a very difficult test to pass. As above, HMRC work on the basis that contractors will be working under SDC, unless it can be proven otherwise.

Given the wide scope of what could be considered to be ‘SDC’, the vast majority of contractors will be thought by HMRC to be under some element of supervision, direction or control to some extent and it will be rare for agencies or umbrella companies to be able to state categorically that there is no element of SDC at all within the contractual chain.   For an umbrella company to process regular expenses in relation to a main site therefore is a risk (not only to the parties in the supply chain, but also to the contractor who may find that later down the line HMRC do not agree that such expenses were ever allowable).   

To ensure that we remain compliant and safeguard our contractors from any potential liabilities down the line, PayStream work with the following two Umbrella company models; 


Employment model
Mobile model

Employment model

It provides the benefits of continuous employment, access to statutory benefits, comprehensive insurance cover, access to an in-house IFA, advances and more! Although travel and subsistence expenses are not permitted to a main place of work, other allowable expenses (such as claims in relation to adhoc journies to and from a temporary workplace) can be claimed via PaStream or through a P87.

Employment model

Mobile model

Suitable for contractors who visit multiple temporary workplaces during the course of an assignment. Mileage can be relieved in relation to adhoc journies between temporary workplaces in line with HMRC approved mileage rates. Other allowable expenses captured on our mobile app or in our portal can be claimed either via PayStream where reimbursed, via a P87 (under £2,500) or by completing a Self-Assessment return.

Mobile model

Risk and debt transfer

If a contractor is found to be claiming T&S expenses in an umbrella company model where they are under SDC it is the employment intermediary operating the T&S scheme that is primarily liable if there is SDC or the right thereof. This means that umbrella companies that are offering a model which allows work to claim mileage to a main site on an ongoing basis need to ensure that they are carrying out thorough SDC tests and gathering substantial information in order to satisfy HMRC that there is no SDC.

It should also be noted that liability may fall on the agency and/or the client where "fraudulent documents" have been provided saying there is no SDC. Although fraud will be very difficult for HMRC to prove it is not difficult to see them making the point when all of an agency's workers are stated to be outside SDC.

PayStream's advice to agencies

There will no doubt be some umbrella companies that suggest a solution where all workers can claim T&S - this may be insurance backed (read the small print) or backed by an indemnity (worthless when you do the maths). We should not forget that it is these sorts of companies that have brought the spotlight on the industry.

We have spoken to many of our agency partners who understand that we need to work closer together. We encourage agencies to review their PSLs and for agencies to work only with those providers they can trust to operate within the rules, particularly bearing in mind the debt transfer risks.

Want to speak to an expert?

Call agency support on 0161 971 8979 or email

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