Travel Schemes and MPs Expenses
Travel Schemes and MP’s Expenses – Alan Nolan, Aspire.
Salary sacrifice travel Schemes, Umbrella Companies and, in particular “Pay Day” tax relief models have all been the subject of press speculation recently, but very few commentators have bothered to consider the positive affects a well-run travel scheme can have on workers who are paid at or around the National Minimum Wage (NMW).
Whilst higher paid workers are able to benefit from salary sacrifice arrangements or can opt to join a standard umbrella company, workers who are paid at or around the NMW are excluded from such beneficial arrangements.
At a time when the UK economy is more dependent than ever on the temporary labour market any attempt by Government to place this sector of the workforce at a disadvantage through additional regulation should be carefully considered prior to implementation.
Meet Joe Public who is 30 years old with one child and a wife who doesn’t work. Joe is unskilled and finds temporary work through an employment business at the NMW. He usually works 40 hours per week, works at a variety of locations and claims tax credits to top up his income. On average, it costs Joe £50 per week in travel expenses to get to work together with food purchased from the canteen. Joe keeps a record of his expenses so that he can make a claim to HMRC at the end of the year.
If Joe worked under a standard contract with the employment business, his take home pay would be £217.09 plus £100.93 in tax credits. He would not be able to claim tax relief for his expenses which will be paid from taxed income. Standard PAYE
Weekly Gross Pay
Less Tax and National Insurance
Potential weekly entitlement to Tax Credits