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Changes to tax relief for travel and subsistence, 6 Ap...

Employment intermediaries and umbrella companies – new rules governing tax relief for travel and subsistence from 6 April 2016

What’s happening?
The Government has announced, following consultation last year, that from 6 April 2016 certain temporary workers will not be able to claim tax relief for National Insurance contributions (NICs) on the travel and subsistence expenses they incur on an ordinary commute from home-to-work.

Who is affected?
The restrictions will apply to workers who are employed through an employment intermediary, such as an umbrella company, or a recruitment agency/employment business and who are supplying personal services (largely supplying their skills or labour) under the supervision, direction or control, of any person, in the manner in which they undertake their role.

This means that workers operating through an employment intermediary, such as an umbrella company, will have to pay tax and NICs on the travel and subsistence expenses described, reducing their take home pay.

HMRC has advised that in respect of Working Rule Agreements (WRA), such as Joint Industry Board and Plumbing Mechanical Engineering Services in the construction sector, tax and NICs may be payable where employees are engaged through an employment intermediary, but the changes will not affect employees who are not covered by the proposed legislation. That is to say, workers directly employed under a WRA are not affected by these changes and will retain the special tax procedures under the agreement.

More information on the changes is available on the HMRC website here.

Draft HMRC guidance on the operation of the proposed legislation is available here.

Unite campaigning for direct employment under industry agreements
For many years Unite has been campaigning on behalf of members in the construction sector on the issue of bogus self- employment including attempts by employers to circumvent tax and insurance regulations. We want direct employment for those not genuinely self-employed, all workers employed under construction agreements to receive their full terms and conditions, and for employers to meet their tax obligations.

In our responses to the Government’s consultations on tax changes to travel and subsistence we highlighted the impact for those employed in construction and called for:

Urgent reform of the law on employment status;

Anyone subject to significant control, supervision or direction in relation to their work to be deemed to be employed for tax and employment rights purposes;

  • Workers who are not genuinely self-employed to be directly employed;
  • Abolition of the Construction Industry Scheme (CIS) – the main facilitator of false self-employment in the industry;
  • Untaxed allowances as part of collective agreements to be retained;
  • The hourly rate of pay a worker/employee his paid to be a minimum of the relevant industry collective agreement rates of pay;
  • Itemised pay statements to be transparent and easy to understand.

Unite is aware of reports of agencies attempting to force workers into so-called ‘umbrella companies’ to off-load NICs and other benefits to the detriment of the worker.

Our advice to members confronted with such situations is the following: 

  1. Members should resist being pushed into payroll companies and insist on being directly employed on a PAYE basis under the terms of the JIB agreement.

  2. Members working in JIB companies should already be directly employed on PAYE by the company, however if you are in a JIB company but not currently directly employed then insist on being changed to PAYE status – remember the JIB is committed to supporting direct employment (see the JIB 2015 handbook).

  3. Attempts to force members into accepting payroll company status against your will should be strongly resisted. In the event of this happening make sure that your shop steward and/or regional official is aware of what is happening and seek their advice. Regional officers should be informed of any companies where it is known that this is happening.

Download this information in a leaflet here