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Tuesday 28 February 2017
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Osborne will consult on ‘abuse of T&S’ tax relief

Thu, 19 Mar 2015

The Chancellor will consult with employment intermediaries, including recruitment agencies, over new rules aimed at preventing them from cutting costs in order to take advantage of tax relief on travel and subsistence for workers engaged through them.

Following a review and consultation, announced in the 2014 Autumn Statement, Chancellor George Osborne used his Budget speech yesterday [18 March] to commit government to changing the rules to restrict travel and subsistence relief for workers engaged through an employment intermediary. The changes, effective from April 2016, will seek to provide a “level playing field” between employment business that seek to lower costs by exploiting these arrangements and those that do not.

The Budget’s accompanying documents reveal the government plans further consultation on the details of the implementation of the new rules, set for April 2016, a move welcomed by Julia Kermode, chief executive of the Freelancer and Contractor Services Association (FCSA).

“I am pleased that the government is receptive to continuing our consultation with them on expenses and has not simply bulldozed ahead and legislated before the end of this Parliament,” Kermode said.

“Removing the right to claim legitimate travel and subsistence expenses for all contractors, freelancers and the self-employed would have a negative impact on the flexible workforce and the UK economy as a whole.”

Rob Crossland, chief executive of professional umbrella employer Parasol and contractor accountant ClearSky, described the forthcoming government consultation as a “huge opportunity”.

He told Recruiter: “It’s vital that the government understands the difference between payroll providers that aid the exploitation of vulnerable and low-paid workers on the one hand, and professional employment providers that support skilled professionals on the other.

“Getting this message across will be the key aim and challenge for us and the rest of the professional contractor services sector during the consultation. If we get it right, this could finally be the moment the cowboys who give our sector a bad name are forced out of business.”

The Budget documents also reveal for the first time personal service companies will be subject to the change in rules. Such companies sell the work of an individual or group of individuals, and is owned and operated by that individual or group of individuals. 

But Andy Chamberlain, deputy director of policy & external affairs at the Association of Independent Professionals and the Self Employed (IPSE), told Recruiter applying the rules to PSCs will cause “a lot of confusion”.

“We believe that where someone is working through their own company they should be explicitly ruled out of this legislation,” said Chamberlain.

“However, if the government is determined, as it looks in the Red Book [Budget documents], to somehow include them and decide who’s under the control of the client and who isn’t and apply the rules based on that then we’re going to say ‘I don’t know how you are going to do this but it’s probably going to be quite complicated’.

“We need to make sure that it is as easy as possible to comply and genuine businesses don’t get dragged into a big administrative mess.”

Mark Groom, tax partner at Deloitte, added that the new rules will need to be clearly defined.

“A new development is that personal service companies will now also be caught by the new provisions.  We hope that ‘intermediaries’ will be defined carefully to avoid collateral damage as far as possible, otherwise, some individuals such as employees who are seconded to their clients may lose out on relief.”