You may have been approached by recruitment agencies offering low rates achieved by reducing employers national insurance contributions through the use of ‘Umbrella Companies’. Advantage provide a quality, competitive and COMPLIANT service without the use of such companies – and without breaking the law.
During his budget speech last Wednesday, the chancellor once again vowed to clamp down on the abuse of travel and subsistence deductions. Specifically, he said:
“And we will stop 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.”
The released budget papers included the following details:
- The budget papers confirm that the clamp down will apply to all workers engaged through an employment intermediary, regardless of whether it is an umbrella or a personal services company. This may explain the increase in the estimated revenue gain to the Exchequer from the measure, revised from £400m to £635m over four years.
- The government has moved away from the options previously proposed by HMRC in December 2014. It now proposes to limit the availability of tax relief on the basis of supervision, direction and control. Only temporary workers who are not under the supervision, direction or control of the end client will be able to claim tax relief. As a result, tax relief will be linked to workers’ status as self-employed under the Income Tax (Earnings and Pensions) Act 2003 (ITEPA).
- The responsibility for delivering the changes has been passed from HMRC to the Department for Business, Innovation and Skills (BIS). BIS have also been instructed to explore how to provide workers with greater clarityon employment status and pay slips. This may well see the changes to travel and subsistence expenses – often associated with confusing payslips – rolled up into a larger reform.
IF YOU ARE IN THE POSITION OF HIRING TEMPORARY STAFF FROM AN AGENCY AND THE CHARGE RATE IS TOO GOOD TO BE TRUE, BEWARE, THE FALLOUT FROM GOVERNMENT ACTION CAN BE PAINFUL!