LITRG Press release: Expenses crackdown must be balanced by protection for individual workers, says tax charity
The LITRG is calling on HMRC not to pursue individual workers for underpayments arising from their involvement in arrangements between engagers of their labour and intermediaries, such as umbrella companies.
LITRG is responding to HMRC’s consultation on restricting tax relief for travel and subsistence for workers employed through employment intermediaries. [The Government is proposing to remove tax relief for home to work travel and subsistence expenses for workers who are i) supplying personal services, ii) engaged through an employment intermediary (e.g. umbrella companies and personal service companies) and iii) subject to supervision, direction or control of any person.] At present a worker may receive a part of his pay from the employment intermediary on the basis that it is reimbursement for tax relieved travel and subsistence expenses so the worker receives the gross amount without any deduction of income tax or national insurance. HMRC’s proposals will restrict such relief in most circumstances, meaning that income tax and national insurance will be expected to be paid on the ‘expenses’ payments.
Anthony Thomas, Chairman of LITRG, said:
“It is our experience that claims for such relief are prone to abuse. HMRC investigate the claims and establish that the payments for travel and subsistence are not eligible for relief; HMRC then often seeks to recoup the resultant tax underpayments from the worker rather than from the intermediary or engager of their labour.
“We want it explicit in the new legislation that individual workers can no longer be pursued for tax underpayments arising in these circumstances, principally because they too often get caught up in complex employment triangles, involving employment intermediaries and employment agencies, which are not of their choice, liking or understanding.”
LITRG’s research has found that the people most affected by arrangements involving intermediaries tend to be low-skilled with low levels of educational achievement. The complexity of such arrangements makes them particularly vulnerable where tax relief is over-claimed by intermediaries operating their pay.
Anthony Thomas said:
“We believe that both the company where they are working at any one time and the employment intermediary should be targeted for any clawback. The company and intermediary should be jointly and severally liable for any inaccuracies and should be pursued for any debt.”
Anthony Thomas has called for a more radical change. He said:
“The vast majority of individuals affected by the changes HMRC proposes are low paid. HMRC and the Department for Work and Pensions should consider an alternative means for assisting low-paid workers with work-related travel costs to mitigate any effect the changes will have on a claimant’s benefit and tax credit payments and provide some recognition for essential work travel costs. For example, an amount could be deducted for travel when calculating someone’s entitlement to tax credits or Universal Credit. This is vital when an individual’s benefits can be restricted or stopped if they refuse employment.
“It is essential that any changes do not affect the current relief for expenses incurred in the normal course of an employee’s duties. In particular, such relief must continue to be available for employees who pay such expenses personally out of their wages rather than receiving reimbursement from their employer.”
LITRG’s submission on HMRC’s consultation document ‘Employment Intermediaries and Tax Relief for Travel and Subsistence’ can be viewed here. Changes are due to come into effect in April 2016.
Chapter three of LITRG’s report, ‘Travel expenses for the low-paid – a time for a rethink?’ sets out its research which found that the majority of workers who are affected by arrangements involving employment intermediaries tend to have low to medium skills, are predominantly from younger age-groups and that minority ethnic groups are over-represented in terms of agency working. There is also a correlation between low educational achievement and those in lower paid temporary or agency work. The report can be viewed here.