The two extracts shown below, from the budget delivered on Wednesday 18th March, indicates that the government will issue consultations on both travel and subsistence and transparency in relation to employment intermediaries.
Current thinking is that such consultations will be issued in the summer of this year and it is believed that the consultation period will last for approximately 3 months. As indicated below, any restrictions will be implemented from April 2016.
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.
A discussion paper relating to travel and subsistence was issued by HMRC earlier this year which we were invited to discuss due to our affiliation with Professional Passport. In addition, we were also part of the EY consortium which compiled a detailed response. We feel this has given them a clearer understanding of how the industry operates and how best to implement any changes. As a compliant provider we fully support any changes HMRC may impose to provide a level playing field in the industry whilst recognising the positives of their intention to restrict travel and subsistence rather than completely remove it.
Although further details will be revealed in the consultation paper, opinions are that if the contractor is not broadly under the direction, supervision or control of the end client then restrictions will not apply. So somebody who broadly looks like an employee will not be entitled to relief whereas someone who looks like a self-employed worker will continue to be entitled to relief.
In relation to transparency we fully support the government’s view on this and as a company we have always fully explained how an individual was employed and provided a clear payment breakdown. This consultation should help to clear up any misunderstandings about umbrella employment as not all providers are fully transparent in how they operate.