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T&S legislation will hit home hard

March 24, 2016  /   No Comments

Julia Kermode

Cuts to tax relief on travel and subsistence (T&S) expenses for contractors will go ahead soon. Julia Kermode looks at the impact.

There’s no getting away from it.  Despite tenacious campaigning, the cuts to tax relief on Travel & Subsistence expenses for contractors are set to go ahead in just a few weeks, and the impact will be significant.

There is no question that when the new T&S legislation comes into effect many workers will be financially worse off, and we expect to see a skills shortage as fewer workers will be willing to travel for assignments.  There will undoubtedly be a knock on effect and Government policies that are heavily reliant on contractors will be hit – the Northern Powerhouse will suffer along with other infrastructure projects that rely on contractors. 

The public sector has come in for some criticism recently with the cap on agency fees for NHS workers, and Jeremy Corbyn MP accusing the Prime Minister of “agency Britain” when quoting figures on the cost of temporary teachers during Prime Minister’s Question Time just recently. 

Our research has shown that 47% of supply teachers currently claim relief on T&S expenses, and we are concerned about the impact on this sector where there is already a skills shortage.  FCSA is also aware that around 90% of social workers, 89% of shift doctors, 94% of locum doctors and 88% of allied health professionals are engaged as umbrella employees or PSCs, so are likely to be impacted by cuts to contractors’ expenses – and that’s probably just the tip of the iceberg.

The Government is determined to penalise the flexible workforce on which it relies to help grow and develop the UK economy.  It makes no sense, but we will work with recruiters and end-clients to ensure its effective implementation in the best interests of the supply chain and the workforce as a damage limitation process. We did it in 2014 when the Onshore Intermediaries legislation came into force and we can do so again for T&S.

The only answer is to work with trusted partners, but with so many new products emerging in the marketplace, how do you know which to trust?  There are a number of steps you can take, and here I outline just a few.  Firstly, what is their financial position?  At the very least you should be running a credit check, and you should also investigate their accounts – if independently audited then you can feel reassured that the figures given are true. You should also check for issues such as conflicting business interests, previously failed businesses, financial difficulties and offshore connections. 

You will also want to check their contracts of employment (umbrella), insurances and levels of cover.  You are well within your rights to request to see a copy of their insurance certificates, VAT certificate and certificate of incorporation.  Don’t forget you trust your partners with large sums of money, so you will need to be assured that they are genuine and have appropriate cover in place. 

You should be wary of potential MSC risk, which in simple terms means that if the intermediary is too “involved” in the management of a personal service company then you, the agency, could be liable for tax and NI.  Some of the new products emerging may have such a risk, so make sure you check, ask questions and seek independent advice. 

If a potential partner has a compliance accreditation, you should confirm that it is genuine – are they listed as such on the relevant website, or can they supply a valid, in date certificate?  Ensure you know what standards have been tested because they are definitely not all the same.  FCSA’s code is published, and there are 15 accredited Full Members who can use the orange logo as they have demonstrated compliance with the code.  There are also 35+ FCSA Associates who have not been compliance tested and use a blue logo. 

These are just some basic pointers on steps you can take to manage your risk.  There are plenty of advisors out there who will be able to support your due diligence testing.

Today, more than ever, a robust supply chain is important so that you protect your reputation, and that of your end-clients as they will not want to be associated with a media expose of poor practice further down the supply chain.  Make no bones about it, with Corbyn saying we are in “Agency Britain” there will continue to be media attention on the temporary labour market. 

Hardly a week goes by without some sort of negative publicity; so I urge you, take the right steps to ensure that you and your clients are not making tomorrow’s headlines. 

Julia Kermode is CEO of the FCSA, the leading independent trade body for umbrella employers and accountancy service providers supporting the flexible workforce.

 

 

 

 

 

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  • Published: 8 years ago on March 24, 2016
  • Last Modified: March 21, 2016 @ 2:33 pm
  • Filed Under: Industry Insider

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