Umbrella Company

Travel and Subsistence Relief- why did things change?

April 2016 saw the introduction in legislative changes by the government to ensure workers are paying the right amount of tax given their own specific circumstances.

The main change, and the one which has attracted the most attention and news coverage across our industry is the removal from most contractors of the option to claim tax relief against Travel and Subsistence (T&S) when employed by an intermediary (typically an umbrella company) and working on a temporary assignment.

HMRC felt that T&S relief was being claimed by more workers than were actually entitled to it through their original intentions and they estimated that the relief being claimed was costing the Treasury around £265 million each year. Therefore, the legislation was introduced to create a ‘level playing field’ amongst workers who although being paid differently, were actually doing the same job.

There are of course many concerns with the legislation. The government is heavily investing in infrastructure and construction projects, and by not being able to claim the relief of T&S, most of the workers fulfilling these projects will actually see their take home way decrease each week.  It is recognised that across key sectors such as construction, education and healthcare, these changes have effectively seen a 20% reduction in pay and that recruitment companies and end clients simply don’t have the resources to compensate for this.

Aside from these concerns around take home pay for contractors, our sector has concerns that actually, the disparity between compliance and non-compliance will be even further apart now than before April. Some suppliers in the market are happy to take risks and process expenses in a way that does not comply with this new legislation and HMRC have a lot to do to ensure that these providers are unable to continue to ignore the law.

The key point for us all to remember is that contractors, recruiters and end clients need to understand exactly what they should be doing to maintain compliance through the supply chain – if we are to operate safely and within the law we all need to play our part in complying with it. Green Lantern will be providing a series of articles over the coming weeks and months to highlight its continuing compliance in our sector, and to provide information as to what we are doing to ensure both contractors and recruitment companies can benefit from our services and trust in our offerings. We have already announced our partnership with Perkbox to introduce more employee benefits, and our continuing work with Professional Passport to verify compliance.

If you have any questions in the short term, please feel free to contact us on 02071642116 and we will be happy to discuss this in greater detail.