Temporary worker

Temporary Worker or Contractor?

30 December 2014

The ongoing HMRC discussion into Travel and Subsistence for Temporary Workers working through Umbrella Companies raises the concept that is there could be a difference between a temporary worker and a contractor or freelancer and if there is should these have different tax treatment?

A Temporary Worker could be deemed to be the same as an employee and hence receive exactly the same treatment as a permanent employee i.e. no allowance for travel or subsistence (food and drink).  This despite them not having the security or long term earning potential of a permanent employee.  Shouldn’t the end client therefore be made to offer them the same contract and terms as a permanent employee? On the face of it that would be fair but would probably result in positions not being offered and temporary workers would actually suffer.

It is assumed that the temporary worker lives close to the place where they are working and shouldn’t therefore receive benefit for the costs they incur in travelling to the client’s place of work.

Other assumptions are that temporary workers are generally lower paid than career contractors but this would seem an unfair assumption if all lower paid temporary workers were excluded from receiving tax relief for expenses. It would definitely not be seen as a politically correct move to unfairly harm the lower paid.

A Temporary Worker could also be seen as a person taking one long term assignment but there are already rules in place to disallow expenses where the contract is expected to exceed 24 months or where it is expected to be the only assignment the temporary worker is undertaking through their umbrella company.

How would it be possible to distinguish them from a contractor who is assumed to take work at various locations often travelling long distances or involving overnight stays in hotels/bed and breakfasts?

Clearly the size of expense claims already does this.

As our earlier analysis also shows is that it is only the contractors who are travelling long distances and incurring costs in travel or overnight stays that benefit for relief on these expenses so in some ways the current system adequately identified contractors versus temporary workers.

Those with the largest claims are the ones who receive and deserve the relief the most. Our analysis also highlighted that people working near to home generally do not have significant claims so the current system does work. The relief contractors gain doesn’t cover the cost of the travel contractors have to incur in supporting businesses.

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