Benjamin Franklin once famously opined “In this world nothing can be said to be certain, except death and taxes”. However, when it comes to temporary workers and their travel and subsistence (T&S) allowances, for too long nothing could have been more uncertain.
There are currently a variety of models hawked around the recruitment market, mostly utilising the services of an umbrella company, which seek to maximise T&S allowances, minimise costs and enhance margins. This all makes for imperfect competition between recruitment agencies such as Kelburn who do not rely upon these structures and instead simply operate their own in house and fully compliant PAYE model.
Well things are about to change. The 2015 Budget statement signalled an intention to “level the playing field between employment businesses that seek to lower their costs by using these arrangements and those that do not” (George Osborne).
HMRC are intending to consult further before introducing in April 2016 revised rules that would remove a temporary workers’ entitlement to claim tax relief for T&S from their home to place of work where:
- The worker is supplied by an intermediary to a third party (an intermediary will include umbrella companies and personal service companies);
- The worker is broadly subject to direction and control by that third party.
So, if a temporary worker looks broadly similar to a direct employee then they will not benefit form tax relief against T&S allowances whereas relief for genuinely self-employed workers will continue. This approach aligns with that taken for agency workers in the Finance Act 2014.
The 2015 budget also announced the desire for greater transparency on how temporary workers are employed and what they are being paid, and further consultation on this issue can be expected from The Department of Business Innovation and Skills (BIS) shortly.
In anticipation of this new regime responsible employers using temporary workers may wish to ask themselves:
- Do my current suppliers use umbrella companies?
- Do my current suppliers use over arching contracts?
- Do my temporary workers receive clear and transparent payslips?
- What may have to change to remain compliant?
Kelburn Recruitment is happy to offer free advice and guidance to any employer uncertain about their current arrangements for temporary workers. Meanwhile, for those interested in reading the relevant text from the 2015 Budget statement, this now follows:
Umbrella Companies and Employment Intermediaries
1.250 – Autumn Statement 2014 announced that the government would review the growing use of overarching contracts of employment that allow some temporary workers and their employers to benefit from tax relief for home-to-work travel expenses, relief not generally available to other workers. This is unfair. As a result of the review, the government will change the rules to restrict travel and subsistence relief for workers engaged through an employment intermediary, such as an umbrella company or a personal service company, and under the supervision, direction and control of the end-user. This will take effect from April 2016 following a consultation on the detail of the changes. It will level the playing field between employment businesses that seek to lower their costs by using these arrangements and those that do not.
1.251 – Stakeholders have also raised concerns that individuals do not understand how their take-home pay is affected by these arrangements. The government wants employment intermediaries to provide workers with greater transparency on how they are employed, and what they are being paid. The Department of Business Innovation and Skills will consult on these proposals on transparency later this year.
Director, Kelburn Recruitment Ltd