Tax lost through temporary workers’ expenses ‘overestimated’
4 December 2014
The government has been accused of overestimating the loss of income tax associated with temporary workers operating via umbrella companies and claiming tax deductable expenses.
Thu, 4 Dec 2014The government has been accused of overestimating the loss of income tax associated with temporary workers operating via umbrella companies and claiming tax deductable expenses.
In yesterday’s Autumn Statement the government said it would review the “overarching” contracts of employment intermediaries such as umbrella companies. It believes that these arrangements enable workers to obtain tax relief for home-to-work travel that would not ordinarily be available.
The Autumn Statement said the government plans to claw back £120m income revenue from salary sacrifice arrangements and expenses, including those associated workers operating through umbrella companies.
However, Julia Kermode, chief executive of the Freelancer and Contractor Services Association (FCSA), told Recruiter this was a “massive overestimate”.
“They are concerned about the potential tax loss because people working through an umbrella are working on temporary assignments and they can claim tax deductable travel costs from home to their temporary workplace. The government thinks this a big pot of money that they are missing, but FCSA have done some initial research and our results don’t ring true to that at all.”
She added: “We do know that there are some more spurious companies out there encouraging travel expenses to be claimed that are dubious. But FCSA members operate to a really tight code of conduct – there’s not a big tax gain from FCSA members, so if an umbrella company is operating compliantly within the ethos of the tax laws then there isn’t a big pot of money there.”
In a statement sent to Recruiter, Tracey Wright, associate director at law firm, Osborne Clarke said: “Compliant or not, HM Revenue & Customs [HMRC] has, for a long time, not liked such arrangements. Any removal of the ability to achieve these tax savings (especially to save the 13.8% NIC) will have a significant impact on this [umbrella] sector.
“With yesterday’s announcement, HMRC picked on the area where it sees there is abuse. Such measures will have direct impact on the costs of Umbrella companies.”
In a press statement, Matthew Brown, managing director of umbrella company giant group, said: “We welcome the planned crackdown on non-compliant umbrella employers in the UK. The flexible workforce is an important contributor to the UK economy and so any measures that improve the working options of contractors across the country, and at the same time stamp out malpractice, can only be a good thing.”
In yesterday’s Autumn Statement the government said it would review the “overarching” contracts of employment intermediaries such as umbrella companies. It believes that these arrangements enable workers to obtain tax relief for home-to-work travel that would not ordinarily be available.
The Autumn Statement said the government plans to claw back £120m income revenue from salary sacrifice arrangements and expenses, including those associated workers operating through umbrella companies.
However, Julia Kermode, chief executive of the Freelancer and Contractor Services Association (FCSA), told Recruiter this was a “massive overestimate”.
“They are concerned about the potential tax loss because people working through an umbrella are working on temporary assignments and they can claim tax deductable travel costs from home to their temporary workplace. The government thinks this a big pot of money that they are missing, but FCSA have done some initial research and our results don’t ring true to that at all.”
She added: “We do know that there are some more spurious companies out there encouraging travel expenses to be claimed that are dubious. But FCSA members operate to a really tight code of conduct – there’s not a big tax gain from FCSA members, so if an umbrella company is operating compliantly within the ethos of the tax laws then there isn’t a big pot of money there.”
In a statement sent to Recruiter, Tracey Wright, associate director at law firm, Osborne Clarke said: “Compliant or not, HM Revenue & Customs [HMRC] has, for a long time, not liked such arrangements. Any removal of the ability to achieve these tax savings (especially to save the 13.8% NIC) will have a significant impact on this [umbrella] sector.
“With yesterday’s announcement, HMRC picked on the area where it sees there is abuse. Such measures will have direct impact on the costs of Umbrella companies.”
In a press statement, Matthew Brown, managing director of umbrella company giant group, said: “We welcome the planned crackdown on non-compliant umbrella employers in the UK. The flexible workforce is an important contributor to the UK economy and so any measures that improve the working options of contractors across the country, and at the same time stamp out malpractice, can only be a good thing.”
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