Findings from a two-month study conducted by a collaboration of trade and professional bodies has revealed widespread confusion amongst hirers about the full impact of impending new legislation governing tax relief on travel and subsistence (T&S) for flexible workers.
The Freelancer and Contractor Services Association (FCSA), the Chartered Institute of Personnel and Development (CIPD), the Confederation of British Industry (CBI) and the Recruitment and Employment Confederation (REC) between them polled almost 500 hirers across all disciplines and sectors.
Under a new and far more sweeping definition of ‘supervision, direction or control’ (SDC), anyone who is engaged via an employment intermediary such as an Umbrella Company will be prevented from claiming tax relief for their usually considerable travel and subsistence expenses.
A majority 95% of hirers engaging Umbrella Company Employees and Personal Service Company (PSC) workers will be significantly impacted. The research also revealed that 71% of the respondents had already determined which roles will be subject to SDC, thereby abolishing the right for those workers to claim tax relief on their T&S costs.
Over a quarter are aware that this will be the case, while three in ten believe it will affect most employment intermediary workers. Just 5% believe that all workers will fall outside the SDC redefinition. Only 39% are truly determining the nature of the working relationship and whether the new SDC definition applies on a case-by-case basis.
The rules are scheduled to come into effect in under two months, yet one-third of those polled have yet to determine what they will do for their Umbrella and PSCs. Respondents who truly understand the impact of the changed T&S rules believe their organisations’ flexibility will be significantly reduced and that the quality of available contractors will diminish. Of those polled, 14% said they would be forced to use fewer Umbrella Employees/PSC workers.
Julia Kermode, CEO of the trade body FCSA, said “It is clear that, whilst the UK government believes in the principle of hirers paying ‘a wage sufficient to attract workers without any special tax subsidy being necessary’, UK plc does not currently have the bandwidth to absorb the significant cost implications of this legislative ruling.
“As individuals will be impacted in 95% of UK workplaces that use umbrella employees and/or PSCs, the findings of this research should give employers and Government alike notable cause for concern.
“We will present a report of our findings to David Gauke MP, Financial Secretary to the Treasury, the Minister responsible for the reforms. We will also be raising awareness of this important evidence with other MPs and key policymakers.”