Subsistence & Travel Review

All Umbrella Companies are Equal responds to HMRC Travel & Subsistence Review

18 February 2015

All Umbrella Companies are Equal (AUCAE) have published their response to the HMRC Employment Intermediaries: Temporary workers – relief for travel and subsistence (food and drink) expenses.

AUCAE highlight that although responses are due this month and that any changes would be announced in the upcoming budget they are not expected to come into force until at the earliest April 2016.

They start by highlighting how Overarching Contracts (OAC’s) have been considered in legal precedents and give references and definitions from the relevant cases (1. Reed Employment PLC and Others v HMRC 2. Elias J in Stephenson v Delphi Diesel Systems [2003] 3. Clark v Oxfordshire Health Authority).

They state that (it is their understanding) that Agency Travel Schemes exist that use OAC’s as a means of creating a temporary or second workplace and hence to gain tax relief on expenses but state this is not the case for Personal Service Companies (PSC’s) or Umbrella Companies in the UK which use OAC’s to “create an employer and employee relationship with all the responsibilities and risks that that brings with it”.

And therefore that “If an employment intermediary engages workers under an over-arching contract, as accepted in law, then the worker will be travelling to a series of temporary workplaces as defined by HMRC; A temporary workplace is somewhere the employee goes only to perform a task of limited duration or for a temporary purpose. The cost of travel to a temporary workplace is deductible. Therefore, the worker does not gain an unfair advantage as their tax position will be the same as any other worker travelling to temporary locations. Unless a ‘permanent workplace’ is defined then employment intermediaries, in common with all other stakeholders, can only rely on the guidance provided by HMRC to determine whether tax relief is available in certain circumstances”.

They discuss the difference (in their eyes) between highly skilled and high paid contractors who perform numerous assignments at differing locations requiring high travel costs and temporary low paid workers who have been pushed into umbrella companies as a means as saving employment costs. The conclusion being that “There are career contractors/workers that move from project to project, assignment to assignment that spend weeks or months on one assignment before moving on to the next and it is this group that are the true individuals working in temporary workplaces that should continue to receive the relief for Travel & Subsistence as originally intended”. And that there is no reason for Agency Travel Schemes or Hybrid Models such as Payday by Payday Models to be allowed to benefit from tax relief on travel and subsistence expenses.

They highlight a number of negatives that would result from HMRC stopping tax relief for Umbrella Company Workers and include:

  • It would unfairly prejudice against the employees of an umbrella company as employees of other businesses will still benefit from relief when working to a temporary workplace;
  • Businesses that utilise temporary workers for short term assignments may not be able to do so because of the loss of relief; and
  • Rates offered to employ temporary workers would need to be increased and may therefore not be viable or performed in other countries.

They also recommend that employees of a PSC should only benefit from tax relief on travel and subsistence if they also comply to National minimum Wage legislation.

The full AUCAE response is available at:

Umbrella-Company Limited are members of All Umbrella Companies are Equal.