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Further reaction to HMRC umbrella travel expenses consultation

Published on Jul 23, 2008 |

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Lawspeed said his week that HMRC's consultation on "agency workers" travel expenses marks the beginning of another phase in the government's review of the agency sector.

The Professional Contractors Group said that "the consultation does explicitly state that it is not intended to alter the expenses treatment of contractors who run legitimate limited companies and PCG will responding fully to help ensure this is the case."

Lawspeed's Reaction

Clearly the principle, that agency workers are able, by operating through an umbrella company or agency, in either case using an overarching employment contract, to claim tax relief against travel expenses, is one that the Government would like to end. The principle is said to have been abused by both agencies and umbrellas with the consequence that the Exchequer has lost money. In addition it is argued that eligibility for tax relief for travel to and from work, which regular employees cannot set off against tax, gives agency workers an unfair advantage.

However the Government indicates a need to balance a curtailment of the relief against the possibility that its removal could damage flexibility of the workforce.

Finally the consultation also considers whether there is other unfairness arising from the use of over arching employment contracts in the agency sector.

With responses due by 13th October 2008, this issue should be carefully addressed within the context of other measures the Government already has in place, e.g. the MSC legislation, and are in the pipeline, e.g. extension of comparable rights to agency workers.

There is no doubt that any agency that supplies limited company contractors should be interested. Umbrella companies should also be concerned since, in the absence of expenses allowances, their very existence may be affected. Most readers will no doubt consider that the Government’s announcement of this measure is profoundly disappointing given that the sector is already under pressure from many quarters.

You can read further reaction to the consultation here