IR35 travel concessions.

The government has signalled its intention to allow those hit by IR35 to claim travel costs in addition to the proposed five per cent deduction for business expenses.

Paymaster general, Dawn Primarolo, pinpointed the ‘concession’ in a prolonged Finance Bill committee debate on the crackdown on personal services companies.

Tory and Liberal Democrat amendments designed to thwart or delay changes to employed or self-employed status were rejected by the government or defeated on a vote.

Primarolo insisted the IR35 drive is against the use of service companies to disguise employment and does not change existing case law used to determine whether someone is an employer, an employee or self-employed.

She also denied claims made by IT consultants that the crackdown discriminates between small and large service companies, giving an advantage to the huge service firms that supply IT services to government departments and large corporations.

The minister appeared to suggest that where ‘a person has an employee relationship with their service company’ the service company could pay for training courses, and by extension, for equipment.

She told MPs: ‘We are giving people five per cent straightaway, and they can deduct other expenses. It is a very generous formula.’

She claimed service companies currently spend two per cent of income on accountancy and other administrative expenses.

Primarolo said travel to and from several different short employments in different parts of the country is not deductible under normal rules.

But she added: ‘A worker who is continuously employed by his service company, and undertakes contracts for clients of that service company in a number of different places, can claim the costs of travelling to and from the clients’ premises.

‘That is because a client’s premises can be treated as a temporary place of work, provided the worker does not expect to work there for more than 40% of the time in a period of 24 months. The legislation will allow this more generous treatment to continue even where there is the same employee relationship.’

IR35 special: page 18.