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On Friday, a group of MPs stepped up the pressure on the government to take action on travel and subsistence expenses schemes used by some independent contractors. Led by Labour member, Michael Connarty, the group has produced an ‘Early Day Motion’ calling for action on these schemes in the Chancellor of the Exchequer’s Autumn Statement planned for next week. The motion characterises the schemes as acting to “artificially classify part of a worker’s pay as expenses, allowing the employer to save to save on tax, while failing to provide the worker with the benefit”.
The Early Day Motion (764) calls on the government to “investigate systematically and in depth all companies known to be using these schemes, to grant HM Revenue & Customs the power and resources to enforce current legislation and to commit to amending legislation to ensure travel and subsistence tax avoidance schemes are not used in the future”.
Previously, Shadow Chancellor, Ed Balls, had called on the government to use a clampdown on these schemes in order to fund a delay in the government’s planned fuel duty rise.
In response to the Early Day Motion, REC chief executive Kevin Green said: “We welcome the continued pressure on the Treasury and HMRC to improve enforcement against questionable travel and subsistence models being promoted by some umbrella and payroll companies. However, we must not lose sight of the fact that are also some legitimate schemes and legitimate providers who do an excellent job for flexible workers across the labour market.”
“To create a level playing field HMRC’s enforcement activity against rogue providers must be swifter and more visible if it this critical issue is to be tackled. The current situation, where we have convoluted guidance that is open to interpretation and little perceptible action from the Revenue, puts recruiters who abide by the rules at a real disadvantage and leads to both workers and the Treasury losing out on income.
“Employers also have a role to play here. The large supermarkets and logistics companies could get rid of these schemes overnight if they audited their supply chains.”
Stuart Davis, Chairman of the Freelancer & Contractor Services Association (‘FCSA’), echoed the REC’s comments: “The disgraceful behaviour of companies operating unscrupulous tax avoidance schemes is completely unacceptable. It is a totally illegitimate practice which takes advantage of the low-paid worker on temporary contracts and the FCSA wholly condemns it”.
“The legislation does exist to clamp down on these illegitimate practices and the FCSA urges HMRC to show its teeth and exercise it now. If it doesn’t, we risk new knee-jerk one-size-fits-all legislation being imposed upon the flexible workforce which is a highly diverse group and therefore cannot be governed by blanket legislation. For example, if all tax free expenses are removed in order to crack down on salary sacrifice schemes, members of the flexible workforce who claim legitimate expenses will be severely penalised. Put simply, blanket legislation might protect one group whilst stifling another.”
The FCSA was formed in 2008 by three of the largest umbrella companies: Parasol, Brookson and Giant.