The new rules on travel and subsistence (T&S) tax relief came into force on 6 April. In the same week, unethical but legal tax systems, benefitting the very top of society, were exposed in the Panama Papers.

Umbrella.co.uk director Miles Grady explains why we need a change.

Last week was characterised by two big bits of finance news. The start of the new tax year brought planned T&S tax relief restrictions into force for many contractors.

It is anticipated that this will hit some contractors very hard. Many will see their take home pay reduced and some might even have to shut up shop entirely.

Meanwhile at the elite end of society, the Panama Papers reveal how the rich, including politicians and world leaders, have used secretive offshore tax regimes in a number of different ways.

Politicians have been quick to highlight that offshore anonymous company structures are unfair, but few have suggested ways to correct the situation. President Barack Obama put it well when he said: “The problem is that a lot of this stuff is legal, not illegal.”

Many of those exposed so far have been described as acting unethically, but few, if any, have acted illegally.  

Umbrella.co.uk Director Miles Grady is urging the government to act quickly to tackle some of the problems associated with offshore tax havens.

He said: “The mind boggles at the fact that many contractors can no longer benefit from minor tax reliefs on items like food and petrol, but yet it is perfectly legal for the wealthy few to hide millions of pounds in secret bank accounts, without having to pay tax in the UK.

“If the government really wants to prove that we’re all in this together then they need to act now to address this imbalance. So far the government has been very quiet on this issue. If they fail to address these problems then people will quickly begin to lose faith in the whole tax system.”

Travel and Subsistence: What are the changes?

Changes to T&S tax relief came into force on Wednesday of last week. The changes affect contractors that operate through intermediaries (like umbrella companies) and who are subject to the supervision, direction or control (SDC) of another person.

The change has been introduced because the government believes that it is unfair that contractors can claim tax back on subsistence expenses on home-work travel costs, while employees on an end-client’s payroll can’t.

If you have any more questions about the changes please contact a member of the Umbrella.co.uk team. Call: 0800 121 6513.  

For more information please contact: 01625 546 610  team@umbrella.co.uk www.umbrella.co.uk