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There has always been a political incentive to do something about the concession, but no-one was sure what to do.
Now the Government has indicated in a consultation document that it intends to remove tax relief for the home-to-work commuting of umbrella workers and directors of their own limited companies (Personal Service Companies).
The Red Book which contains the details of the Chancellor's announcements said (at 2.182). Employment intermediaries and tax relief for travel and subsistence – As announced at March Budget 2015, the government has published a consultation document alongside the Summer Budget on detailed proposals to restrict tax relief for travel and subsistence for workers engaged through an employment intermediary, such as an umbrella company or a personal service company. The changes will take effect from 6 April 2016. (Finance Bill 2016)
Brookson - Expected
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"The document outlines proposals to remove tax relief for the cost of home-to-work commuting for those employed through an umbrella company or directors of Personal Service Companies and working under the supervision, direction or control of any person. The 12 week consultation runs from July 8 and closes on 30 Sept 15 with any changes proposed to be implemented from April 6 2016.
"Brookson will continue to feed into this consultation to ensure that the impacts which these proposals will have on the genuinely self-employed are understood and given thorough consideration."
APSCo - Sensible
Samantha Hurley, from agency group APSCo said: “Mr Osborne made a number of announcements in relation to employment taxation and National Insurance which are relevant to the professional recruitment sector including, of course, the anticipated consultation on travel and subsistence tax relief.
"The Government proposes removing tax relief on home to work travel and subsistence for those workers who are engaged through an employment intermediary, and who are subject to supervision direction and control. As we have commented previously, APSCo feels that this appears to be a reasonably sensible way forward, and this approach will bring this tax relief in line with IR35 legislation and the 2014 changes to the Income Tax (Pensions and Earnings) Act.”
giant - Sledgehammer
Matthew Brown, managing director of specialist services provider, giant group said: “Fully compliant umbrella employers play a critical role in the supply chain of contingent workers. Not only do they ensure that contractors have full employment rights for the numerous assignments that they work on, but also that they are fully tax compliant. Consequently, they contribute millions of pounds every year to HMRC. However, unfortunately the reputation of these compliant organisations has been tarnished by the small minority of firms which have sought to fly in the face of national minimum wages and expenses legislation.
“Whilst we welcome the crackdown on these firms, we urge the Government not to use a sledgehammer to crack a nut. An unintended consequence of a broad brush approach could lead to compliant organisations, that play a key role in the ongoing success of a number of stakeholders - not least HMRC - being inadvertently punished. We would also inevitably see a rush of workers into the limited company model which would push the spotlight onto that particular mode of engagement.
"In fact, Chancellor Osborne also announced that the Government has asked HMRC to take another look at the effectiveness of the current IR35 model. We must hope that there is a considered approach that does not affect the functionality of the UK flexible labour market, particularly at a time when data shows that companies are choosing flexible labour over permanent labour. If anything, the UK should be enhancing this method of working so that companies are more dynamic which would naturally only aid the UK’s growth prospects.”
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Susie Hughes © Shout99 2015
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