Proposed changes to travel and subsistence relief ‘will be detrimental’

Nick Elvin

HMRC’s proposed changes to travel and subsistence relief would be detrimental to the flexible workforce. That was the view of attendees at a meeting held by the ARC in which HMRC’s consultation on “employment intermediaries and tax relief for travel and subsistence” was debated.

The event, which was attended by speakers from HMRC, FCSA and IPSE, as well as a Treasury representative, focused on proposals that the tax reliefs currently available to employed workers travelling to and from a temporary place of work, should be limited only to those who are not under the supervision direction or control (SDC) of the hirer.

In a show of hands, every audience member indicated that they thought the changes would be harmful, while Julia Kermode, speaking for the FCSA which represents umbrella companies and accountants, said: “It is nearly always possible to formulate an argument that a right to SDC exists in every type of engagement, and so why bother to have a test at all. The proposal does not work fairly and the timing is wrong.”

On the HMRC proposal that the hirer could be liable for unpaid levels of tax, Adrian Marlowe, chairman of ARC, said risk-averse hirers will generally not want to see any scheme in place, and will insist on retaining the right to SDC.

“Most temporary worker indemnity insurances ask for the hirer to have that right in any event,” he said. “Also any tax which threatens the hirer could have the effect of deterring the hirer from using agency workers in principle, which is not helpful for the temporary and contractor supply industry.”

Another theme that arose was why the Government is so keen to push ahead with new potentially damaging proposals when the last round of tax changes under the agency tax rules have had no time to be assessed.

“Agencies have only recently filed their first returns under the agency tax reporting rules; surely there should be some assessment of the results first,” said Andrew Chamberlain of IPSE, who was present to talk about HMRC’s discussion document on IR35. “We can’t help but view there being a link between the consultation and discussions relevant to IR35.”

Referring to the confusion that could arise from multiple tests relevant to agency tax and intermediary tax, as well as possibly IR35, Marlowe urged HMRC to take a much more simple approach.

“Ministers want to recover what they see as some £265m from tax avoidance, but the rules have always allowed relief for all workers travelling to a temporary place of work,” he said. “The idea that an agency worker is not travelling to a temporary place of work is not rational, but we all understand that HMRC wants to stop abuse of the rules or their widespread misuse. So there are two elements, first the lost tax and NICs revenue, and then the question of flexibility of the temporary workforce – do we want a flexible workforce or not?

“On the question of lost tax, why not remove reliefs for some kinds of subsistence, for example lunches. Why do you get relief if you buy a sandwich away from the office, but not if you are at your regular place of work – the cost is the same,” Marlowe said. “This could be done across the board and could instantly make tax savings for HMRC without affecting any flexibility at all.”

On the question of a test for an expenses rule Marlowe explained: “We would like HMRC to look at this in a different and more straightforward way. Agency workers by definition work at temporary places of work and their status in practice is entirely different from regular employees of the hirer. Scrap requirements for overarching employment contracts and any SDC test. If they are an agency worker, perhaps as defined by the Agency Worker Regulations 2010, they have that status and this should be sufficient as the test.”