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- Nick Elvin
The Government has launched a consultation to discuss the removal of tax relief for home-to-work travel and subsistence expenses for workers engaged through an employment intermediary, as part of its 2015 Summer Budget.
The proposed measures would affect those who are subject to supervision, direction and control, and are employed through an intermediary such as umbrella company.
The consultation was previously announced in the Chancellor’s Budget speech in March, under the Coalition Government. George Osborne said at the time that the measures were aimed at preventing “employment intermediaries exploiting the tax system to reduce their own costs by clamping down on the agencies and umbrella companies who abuse tax reliefs on travel and subsistence – while we protect those genuinely self-employed”.
Commenting on the launch of the consultation, Matthew Brown, managing director of umbrella employer 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.”
Samantha Hurley, head of external relations and compliance at APSCo, said: “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 & Earnings) Act.
“The Chancellor also announced that while Government recognises that many individuals choose to work through their own limited company, it feels that the current IR35 legislation is not effective enough and has asked HMRC to start a dialogue with business on how to improve the effectiveness of the existing IR35 legislation. APSCo is due to meet with the IR35 Forum in two weeks’ time and this will obviously be a major topic for discussion.”
The consultation will run for 12 weeks until September 30.
In his Budget speech, the Chancellor announced a number of other measures that will affect workers and businesses.
They include a new National Living Wage of £7.20 an hour for the over 25s, which will be introduced from April 2016, and which will rise to more than £9 an hour by 2020.
The tax-free Personal Allowance will be increased from £10,600 in 2015-16 to £11,000 in April 2016, with the Government looking to increase it again to £12,500 by 2020. The higher rate threshold will increase from £42,385 in 2015-16 to £43,000 in 2016-17.
Corporation Tax will be cut to 19% in 2017 and 18% in 2020, while the Employment Allowance will increase by £1,000 to £3,000. Therefore next year, businesses will be able to employ four people full time on the National Living Wage and pay no National Insurance at all.
Three million new apprenticeships will be created by 2020, funded by a levy on large employers, while public sector pay will increase by 1% a year for four years from 2016-17.
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