New HMRC Guidance on Travel and Subsistence Expenses
HMRC Clamps down on Minimum Wage Rules
Historically some umbrella companies have managed to get around the requirement to pay at least the minimum wage to some contractors (working as an employee of the umbrella company) by using a loop hole that allowed any payments in relation to travel and subsistence to be taken into account to make up any shortfall i.e. combined the salary and expenses were equivalent to at least the minimum wage (currently £5.80 per hour).
The net effect of doing this was that the contractor would pay less tax on their earnings.
From 1st January 2011 HMRC have said this practice will no longer be acceptable.
At Paymatters all contractors working as our employees receive a wage of at least the national minimum wage before receiving any expenses (and hence ensuring no underpayment of taxes).