|
It was widely reported earlier this week that Mr Milliband would set out plans to “prevent so-called umbrella companies being used by firms to avoid tax and national insurance by exploiting expenses rules” in his conference speech.
Initial announcements from the Labour Party suggested that it wants to cut the tax relief for travel and subsistence expenses that temporary workers using umbrella companies are entitled to.
In the event, he made no direct reference to umbrella companies – but several media outlets were still reporting afterwards that the clampdown was part of Labour’s plan to combat tax avoidance.
When Labour HQ was approached to clarify the situation they dismissed the earlier leaks as 'speculation', though it had also been suggested that the labour leader omitted several sections of his keynote speech in error.
Compliant
Nevertheless, it sent fears through the umbrella sector amid concerns that any attempts to crack down on rogue companies could damage compliant ones.
Derek Kelly, managing director at umbrella Parasol’s parent company Optionis, said: “There is a lack of clarity over what, if anything, Labour is actually proposing.
“Despite the party PR machine suggesting ahead of the speech that talk of a crackdown was forthcoming, Mr Miliband made no reference whatsoever to umbrella companies.
“We contacted Labour HQ on Tuesday afternoon, and were told very clearly that anything not included in the speech should be dismissed as speculation.
“I’m sure we haven’t heard the last of this. However, for the record I would urge policymakers to steer clear of tarring all umbrellas with the same brush.
“No one can deny that there are some unscrupulous providers operating at the less reputable end of the market – often in sectors such as construction, warehousing and hospitality.
“However, it is important to make a distinction between those firms and professional, compliant employment providers – such as Parasol – that offer skilled contractors and freelancers genuine support.
“Until politicians and civil servants grasp this, it sadly seems inevitable that our entire sector will continue to be dragged unfairly into the ongoing debate on tax avoidance – damaging Parasol and other compliant providers by association.”
Valuable service
Those sentiments were echoed by another umbrella group, NoPalavar, who claimed that umbrella companies provide important service by collecting tax on income in a way that is easy for HMRC to administer
Advertisement 
“Flexible workers and the businesses that use them have been hit by a string of regulatory changes, from the managed services company legislation to changes to the agency workers regulations. What is needed is stability, not more change.
“Umbrella companies provide a very useful service by providing an efficient way for income tax and National Insurance Contributions to be collected from large numbers of workers by one company. This makes it much easier for HMRC to administer the tax of large numbers of self-employed people.”
NoPalaver explains that removing the tax relief on expenses like travel would mean that umbrella companies would be uneconomic to run.
Graham Jenner continued: Getting rid of umbrella companies could encourage more self-employed people to set up as limited company contractors, which are much harder for HMRC to police for any tax discrepancies. Jeopardising what has proven to be an effective and efficient way to collect income tax and national insurance contributions is a big risk to take for the small reward of bringing in a marginal amount of extra income from expenses deductions.
“The assumption that people employed by umbrella companies should not be entitled to tax deductible expenses should be challenged. Flexible workers paid through an umbrella company are not like full time employees – for example, they don’t travel to the same job in the same place every day. Removing this allowance may make it uneconomic for them to work as contractors, and the businesses that benefit from access to a flexible skills base will be the losers.”
--
If you wish to comment on this article, please log in and use the Reply button below. Registering is free and easy - see 'Join Shout99'.
-
Susie Hughes © Shout99 2014
|
