Keys Points from Umbrella.co.uk regarding HMRC Travel and Subsistence Review

23 January 2015

Keys Points from Umbrella.co.uk regarding HMRC Travel and Subsistence Review

One of our Directors at Umbrella.co.uk, Miles Grady BA (Econ) Hons ACA, has performed a detailed review of the HMRC review into Travel and Subsistence expenses and below lists a number of key points into why HMRC should not stop umbrella company contractors or those working through their own Limited Company from being able to claim Travel and Subsistence expenses tax free and why to do so does not mean that contractors get preferential treatment over their permanent counterparts:

  1. When contractors negotiate a pay rate for an assignment they do so based on the hours they will be working but also the hours and costs they will incur when travelling to a faraway assignment. They would also take into account the costs of overnight stays that may be necessary. The rate they get should not therefore be seen as their wage but a combination of wages and reimbursement of their expenses.
     
  2. Our internal analysis shows it is the contractors that travel the long distances that make up 90% of all claims. It is completely unfair on them to be treated the same as a permanent employee who lives close to their place of work. To do so would mean that contractors will no longer be able to take assignments requiring any distance of travel. Contractors do not have the luxury of always choosing assignments near home or moving to be near their permanent place of employment.
     
  3. There should be no argument that contractors are working at a temporary location and in the majority of cases new contract lengths are initially for 3 months or less. They are classed as Temporary Workers and hence the workplace is temporary.
     
  4. Rules already exist to disallow long term contracts (currently over 24 months) and to ensure the contractor is expecting to be working at multiple locations and hence temporary. If a permanent employee is asked by their employer to work at varying locations then they too would be reimbursed for these expenses tax free. We are just asking for contractors working for umbrella companies to be treated the same as permanent employees.

We are currently working alongside 35 of the leading UK Umbrella Companies to give a Group response to the HMRC review of Relief for Travel and Subsistence Expenses and are deeply concerned on the effects on not only our industry and employees but the 200,000 flexible workers who choose to use an umbrella company plus those working through their own PSC.

We have requested a meeting with our local MP, The Rt Hon Mr George Osborne, to highlight the inaccuracies in the damaging campaigns being run by UCATT and Labour against the umbrella company industry that are being publicised through the media. We strongly believe we provide a valuable service to the people working through us and to the economy as a whole.

It appears the Government and HMRC are focused on the £400m additional tax they expect to collect but HMRC have failed to provide any evidence to support this figure and there are serious concerns that it is correct. Even if this figure is accurate, changing policy does not guarantee this income would be achievable as the result is likely to be a reduction in contractors. 

Furthermore, we believe there needs to be careful consideration of the wider economic impact of penalising the flexible workforce and creating significant inequalities between contractors vs permanent employees.  Economic recovery so far has been widely attributed to the UK’s flexible workforce that enables businesses to be agile in responding to peaks in demand without the liability of permanently increase headcount. 

As a Group we are developing a number of alternative proposals that would target the abuse highlighted within the HMRC discussion paper, without the unintended consequence of penalising workers and compliant businesses that are genuinely operating within the spirit of current legislation.  

At Umbrella we would be happy to hear from any contractors or businesses that utilise the services of contractors so that we can reflect your thoughts in our Group campaign.

Miles Grady BA Econ (Hons) ACA is a Chartered Accountant with over 25 years’ accountancy and taxation experience and is a founding director of Umbrella.co.uk. He has previously worked at accountancy firms KPMG and Mazars.