The wording of the new travel and subsistence legislation has been bungled and will have to be re-drafted, HMRC has conceded.

The new legislation, which came into effect on 6th April, effectively bars all contracting professionals working through employment intermediaries from claiming tax relief on their untypically high travel and subsistence expenses (permanent employees tend to travel considerably shorter distances to their places of work than contractors do). HMRC drafted the new rules to prohibit any worker who is subject to the right of ‘supervisions, direction or control’ (SDC) by anyone they work with from claiming relief on their home-to-work expenses.

Last week, a Revenue official wrote to industry figures alerting them to an “unintended consequence” affecting the application of the rule changes for most employment intermediaries, though not for managed service or personal service companies. The letter stated: “To resolve this, the legislation will be amended at the earliest opportunity.”

Tax expert Paul Hughes of the Umbrella Company trade body PRISM said that as the Finance Bill 2016 made its way through Parliament, PSC and Umbrella Companies hoped to benefit from clear guidance to assist them to move forward with greater certainty. However, he added: “Having been widely criticised for the appalling amended guidance, it now seems that HMRC cannot even write the legislation to align with Parliament’s wishes.”

During its campaign against the rule changes, PRISM has consistently argued for a strategic review of the tax legislation affecting contracting professionals. This has now been tabled as an amendment to the Finance Bill, which is still moving through Parliament.

PRISM CEO Crawford Temple pointed to the extraordinary complexity of UK employment legislation, which has so many tests to determine employment and tax status that those who write the laws are simply unable to get it right the first time.

He said: “What chance has the ordinary man and woman got who are not tax experts but nurses, engineers, teachers, construction workers and IT experts?

“This is proof if any were needed that PRISM’s proposed strategic review, backed by 55 cross-party Parliamentarians and a Commons intervention by a major opposition party, is long overdue. UK workers are classed officially as either self-employed or employed. The truth is there is a third way of working and contractors are losing patience waiting for Government to play catch up.”

His views were endorsed by Mr Hughes, who said that Revenue officials simply do not understand how the rising flexible workforce in the UK currently operates, with the consequence that HMRC continues to shoehorn workers into either self-employed or employed camps, an outdated approach that ignores the third category of independent contractor.

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