Travel Subsistence

Professional Passport Responds to HMRC Discussion on Travel & Subsistence

11 February 2015

Professional Passport have submitted their response to the HMRC discussion document – “Employment Intermediaries: Temporary workers - Relief for travel and subsistence”.

Professional Passport is an independent professional membership organisation working with Freelancers/Contractors, Recruitment Agencies, End clients and Providers (i.e. Umbrella Companies and Accountancy Practices).

Umbrella-Company Limited and Umbrella Accountants LLP are Professional Passport approved providers and as such are subject to an annual compliance audit.

A summary from Professional Passport is available online at:

https://www.professionalpassport.com/pdfs/Provider_Intell_February_2015.pdf

The full response is at:

www.professionalpassport.com/pdfs/Response_to_Travel_and_Subsistence_Discussion_Document.pdf

Our summary of some key points made by Professional Passport include:

  • A distinction should be made between compliant providers and non-compliant providers who in particular have targeted the lower paid temporary workers.
  • The use of Preferred Supplier Lists by Agencies to ensure the use of Compliant Umbrella Companies.
  • A “One Size fits all” approach by HMRC could drive specialist work from the UK. This would also give a commercial advantage to non-compliant Umbrella Companies who potentially would not be restricted by any new rules (as they would be happy to flout them).
  • By targeting Umbrella Companies HMRC will actually collect less tax rather than the additional £400m they are predicting. Half of all Umbrella Company workers would switch to operating through their own Personal Service Companies (PSC’s) which would give the contractor additional tax savings. Also other solutions would become available.
  • HMRC targeting Overarching Contracts of Employment (OAC’s) is not the correct route as there are already solutions in the market that operate without using an OAC. Some of these solutions circumvent rules designed for the protection of workers and instead of helping create an even playing field between providers would have the opposite effect.
  • The issue to be addressed is the high number of low paid workers who previously didn’t claim tax relief on expenses and where these expenses are exaggerated and unchecked. These are the reason for the increase in relief’s given.
  • The wholesale move of low paid workers to umbrella companies was not as a result of the actions of compliant umbrella companies as they are unable to deal with low paid workers (or top reimburse them any expenses tax free). Compliance to National Minimum Wage legislation, Statutory Entitlements (Sick pay/Maternity pay) and The Agency Workers Regulations ensure temporary workers are treated fairly and by not operating PayDay by PayDay Models.

Umbrella Comment

The key is that only valid expenses are reimbursed tax free. If a low paid worker is travelling to a temporary location with the aim of performing multiple assignments then they too should qualify for relief.

As we have previously shown claims are proportional to distance travelled and hence those that are travelling long distances to a temporary location or staying overnight in temporary accommodation are correctly benefiting the most from the available relief and indeed the majority of the relief is in respect of these people clearly travelling to a temporary assignment and not having the luxury of working near to their place of residence. Claims are proportional to distance travelled.

It is worth noting that the lower paid in effect receive less relief as their applicable tax bands are lower. Amount of expenses claimable can also be restricted if there is insufficient revenue generated by the assignment to cover the statutory minimum wage and all expenses.

One simple scenario could be to introduce a minimum distance for claims i.e. if a workplace is within 10 miles then no relief should apply for that assignment. However given that the worker will be working at varying assignments it would still seem appropriate that all locations should benefit from relief. At the end of the day short distances will only result in a small claim and hence relief and are therefore incidental to the whole picture.

In terms of an even playing field it is important that all umbrella companies should have the same rules and checks in place so where ever you’re working your expenses claim should be for the same value. This means the mileage rate and scale rate subsistence rates should be the same for all umbrella companies and subject to appropriate compliance checks and verification. Also which expenses require receipts and which do not. We feel that the current HMRC scale rate subsistence rates are appropriate and help to reduce unnecessary administration.

If you would like to speak to umbrella.co.uk please call us on 0800 121 6513.