APSCo responds to HMRC Relief for travel and subsistence consultation
“The Autumn Statement 2014 announced that the Government would review the use of overarching employment contracts (“OAC”) by employment intermediaries (generally meaning traditional umbrella companies), which take advantage of the rules for travel and subsistence expenses. HMRC feels that these arrangements & lsquo;mean that some people are able to benefit from tax relief on home to work travel expenses that is not generally available to others.’ They also believe that the income tax and NICs avoided through the use of OACs operated by umbrella companies is estimated to amount to be around £400m per annum.
“HMRC is suggesting that protection of the low paid is one of the justifications for taking action in this area because based on their analysis, for around a quarter of umbrella employees, the fee due to the umbrella company is greater than the travel and subsistence relief in relation to their employment.
"The first option being looked at is that where the individual is supplied through a third party the workplace of the end client would in all cases be a “permanent workplace”. In this case no relief for travel from home to workplace, and associated subsistence, would be available. This would apply whatever the form of the third party – in other words, this would affect personal service companies as well.
“Option 2 would be to restrict the availability of tax relief for travel from home to workplace, and associated subsistence costs, where the individual was employed by an intermediary specifically under an OAC. This could be accomplished by stopping OACs being treated for tax purposes as giving rise to a series of temporary “employments” under a permanent contract.
“While APSCo welcomes any initiative to close the loopholes that allow abuse of the rules, the first option would, yet again, result in professional contractors , professional recruiters and the professional flexible recruitment sector as a whole suffering collateral damage at the hands of broad brush legislation which is really meant to protect lower paid workers."