PRISM, the trade body and association of Umbrella Companies, announced that it has uncovered evidence of HMRC call centres incorrectly informing workers that they are entitled to a range of expenses, including travel and subsistence (T&S), even though this is plainly wrong, as the workers involved are all subject to supervision, direction and control (SDC) and IR35.
Recruiter magazine learned from PRISM that its CEO, Crawford Temple, discovered during recent conversations with providers that “at least a dozen” cases of this nature had occurred in the last month alone. The most recent examples involve independent professionals contracting in public sector bodies (PSBs) via their own limited companies.
Mr Temple observed that April’s changes to tax rules affecting contracting professionals, especially reforms to IR35, coupled with mistakes made by HMRC have caused widespread confusion and additional tensions across the market. He said: “This is more evidence, if any were needed, that the whole system of tax and employment legislation is too complicated for people to understand.
“If those within HMRC are giving the wrong advice because it is not clear, what chance does a contractor have who just wants to carry out sensible financial planning and get on with the job?”
An HMRC spokesman responded to Mr Temple’s comments but seemed to evade both his charge of inaccurate advice from Revenue officials and his observations about an impossibly complicated and outdated tax system.
The spokesman simply said that new “rules for T&S expenses for workers engaged through employment intermediaries were introduced from 6th April 2016.” The rules, he explained, places contractors who work through intermediaries such as recruitment agencies and “own companies” (i.e. personal service companies or limited companies) in the same position as salaried employees for tax purposes. He added, “Our frontline staff have guidance about the changes.”
As it stands, the response fails to address the problems raised by PRISM altogether.
The Social Market Foundation think tank has been conducting an independent review of employment and tax legislation that PRISM has sponsored. It is scheduled to report shortly.
Earlier this week, Mr Temple took issue with MPs from the Work and Pensions Committee, and Government policy more broadly, over tax. The existing system, he said, recognises only two types of tax status (employed and self-employed) but three types of employment status. This, he said, will have to change for the system to keep abreast of profound changes in modern working practices.