The umbrella sector is, in many ways, something of an unsung hero for the UK economy. With over 400,000 employees working ‘under the umbrella’, and a yearly contribution of over £11billion to the Treasury coffers, surely this enterprise is substantial – and positive enough – to earn the respect of the Government?

How is it, then, that umbrella companies and their hard work seemingly falls under the radar and goes unappreciated? As Umbrella’s Operations Director, Neil Armitage explains, nowhere is this felt more sharply than in the debate about travel and subsistence expenses for contractors:

“For some time the HMRC has focused attention on the issue of tax relief for temporary workers operating travel and subsistence expenses. Currently such tax relief isn’t substantial, affecting only 10% of turnover produced by umbrella employees.”

“The approach has been to isolate the issue of these expenses as some sort of ‘rightable wrong’ – an issue that can be addressed by Government and legislation, and provide a win for seemingly tax-tough politics. There is a commonly-held feeling that the Government’s estimates of missing tax revenue – something close to £400million – is exaggerated and must be argued quite strongly.”

“The reality is that this thinking is mis-guided. It has led to many in the industry questioning whether the UK Government really values the work umbrella organisations do. Recently the CBI came out in support of papers published arguing for a fuller, more complete revision of the tax compliance issues that exist in the umbrella sector.”

“Interestingly the CBI’s comments carried the debate further, arguing that the UK Government’s failure to appreciate the wider contribution of Britain’s flexible workforce to our recent economic recovery was a poor reading of such a valuable asset.”

“As March looms and the Budget statement comes closer, fears gather that the HMRC will have simply mis-read the situation on the ground. With umbrella workers travelling nearly twice the daily average on the roads going to and from work, losing protection for these expenses could force workers to restrict their working horizons to save travel money made vulnerable by potential reforms.”

“In the end it will come down, many feel, to just how much value HMRC attaches to the contracting and freelancing communities. Are they there to be hauled over the coals to the benefit of ill-thought out taxation policy? Or is it better to review wider tax practices and work with umbrella organisations to further fine-tune compliance? One thing is certain: there are some big decisions ahead.”