The Freelancer and Contractor Services Association (FCSA) has moved to challenge misleading assertions about Umbrella Companies made in a recent article in the Guardian.

The newspaper’s article suggested that the leading recruitment company 1st Step Solutions had advised some of the UK’s top construction companies to redesignate temporary staff of some of the country’s biggest building sites as “unsupervised” in order to elude the Government’s tough new supervision, direction or control (SDC) rules. In so doing, the reclassified workers would, the recruiter implied, be able to go on claiming tax relief on travel and subsistence expenses, which the Chancellor expressly set out to abolish in the March Budget.

The Guardian’s story re-quoted the Chancellor’s comments from last year accusing employment intermediaries of “exploiting the tax system” by abusing tax reliefs on T&S to lower their own costs.

The FCSA referred to its own research, which clearly demonstrates that Umbrella Companies have not been exploiting tax relief on a large scale. In a statement, the organisation said:

“FCSA research shows that, on average, 40% of Umbrella Employees receive the relief which confirms that this is not the case.  Moreover, it is simply that this group of workers has received the relief when it is genuinely necessary to be recompensed for travelling significant distances – usually more than 180 miles per week, compared to a “normal” commute which is 84 miles per week – to carry out an assignment.”

The story broke after the Unite union had obtained a leaked presentation from 1st Step Solutions, a specialist recruiter supplying self-employed workers in industries including construction and rail. The article quoted unchallenged remarks made by one of the union’s national organisers, Bernard McAulay. These remarks alleged that Umbrella Companies, which he referred to as vehicles for “bogus self-employment,” results in workers being “stripped of holiday pay and their automatic enrolment pension contributions, while allowing employers to pay no national insurance and circumvent nationally agreed rates of pay.”

The FCSA dismissed this comment as “completely untrue” of Umbrella Companies in the supply chain, as they all provide temporary workers with all the statutory benefits of permanent employment, including holiday and sick pay, allowing these workers to undertake a series of contracting roles while managing their financial affairs centrally.

The media story also implies that a construction company would simply need to declare that its workers are not subject to SDC in order to go on claiming relief on its T&S expenses. However, both the legislation and new guidance from HMRC unambiguously states that a simple declaration would be insufficient evidence of a worker’s status.

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