New travel and subsistence regulations confusing hirers

Research has revealed that only 35% of UK hirers are fully conversant with the pending Travel & Subsistence (T&S) regulations, with 38% of operational teams claiming to be fully up to speed compared to only 14% of HR respondents.

The research, conducted over the last two months by trade and professional bodies – the Freelancer and Contractor Services Association (FCSA), CIPD, CBI and the REC – also found that 92% of organisations that hire freelancers and contractors will not be compensating all workers for their financial loss that changes to Travel & Subsistence (T&S) tax offset rules will present. 

This comes despite the Government suggesting that it “expects business to pay a wage sufficient to attract workers without any special tax subsidy being necessary”.

The new rules were announced in last summer’s budget, with the Government concluding that the way some employers use umbrella contracts to allow temporary workers to benefit from tax relief on travel and subsistence expenses to be unfair.

With this research, the industry bodies sought to gauge the levels of awareness of the new tax legislation amongst end hirers, how they would respond and how the new rules would impact their hiring decisions when the new regulations come into effect in April. 

The survey also found that around four-fifths of hirers who plan to keep rates static believe that their decision will have a negative impact on workforce flexibility, the same proportion thought it would impact competitiveness, and 86% thought it would affect their ability to attract and retain staff.

 Almost all (95%) of hirers engaging with umbrella companies will be impacted, it found.

Certain roles will be subject to supervision, direction or control (SDC), which will mean those workers cannot offset these expenses against tax. For those hiring companies who have worked out who will be subject to SDC, three in 10 believe this will be the case for most people. Only 5% think all workers fall outside SDC, the survey found.

However, with less than two months to go before the legislation takes effect, one third of respondents are yet to determine what they will do for their umbrella and PSC workers. Concerningly, 14% of hirers said they would use fewer umbrella employees as a result of the changes.

Commenting on the findings, Julia Kermode, CEO of The Freelancer & Contractor Services Association, said: “It is clear that, whilst the UK government believes in the principle of hirers paying ‘a wage sufficient to attract workers without any special tax subsidy being necessary’, UK plc does not currently have the bandwidth to absorb the significant cost implications of this legislative ruling.  

“As individuals will be impacted in 95% of UK workplaces that use umbrella employees and/or PSCs, the findings of this research should give employers and government alike notable cause for concern.

“We will present a report of our findings to David Gauke MP, Financial Secretary to the Treasury, the minister responsible for the reforms.  We will also be raising awareness of this important evidence with other MPs and key policymakers.”