TaxPersonal TaxContractors warned on IR35 loophole

Contractors warned on IR35 loophole

The Chartered Institute of Taxation has warned contractors who work through personal service companies they could lose out on reclaimed travel costs unless a change is made to rules that come into effect from 6 April 2002.

The CIoT said the revised system of Inland Revenue ‘authorised mileage rates’ which allowed employees to claim a fixed amount per mile travelled on business would not work for those with PSCs as it is not compatible with IR35 rules in operation since April 2000.

According to the CIoT, contractors operating through PSCs will not be able to obtain tax relief for their business mileage and will be at a disadvantage compared with other employees.

Anne Redston, chair of the Personal Taxes Sub-committee of the CIoT, 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.’

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