A tax expert has urged HMRC not to ensnare compliant Umbrella Companies in its proposed crackdown on travel and subsistence allowances and to target rogue operators instead.
Former HMRC inspector Bob Jones explains in the contractor news outlet Shout99 that the rules pertaining to temporary workplace travel were introduced in April 1998, before the Umbrella Company model had been devised. The Umbrella model enables employees to be engaged in temporary roles in several different locations via an overarching contract, a feature that allows relief to be claimed on travel and subsistence.
Since neither permanent employees nor temporary workers who are not engaged via an employment intermediary on an overarching contract are eligible for relief, the Revenue is now arguing that the legislation never intended tax relief to be granted under such circumstances and that the introduction of an Umbrella intermediary brings about an unfair tax advantage to those engaged by the Umbrella Company.
Mr Jones draws attention to the meticulous process involved in granting dispensations to entirely law-abiding and complaint Umbrellas, saying: “In order for an umbrella to qualify for dispensation, HMRC must be satisfied that there is no loss of tax to the Exchequer and this is a lengthy process, as applications are looked at in great detail.”
He continued: “It is impossible for a compliant umbrella to compete with [an] umbrella that does not comply with the law, and personally I feel that HMRC should be focusing their attention on the non-compliant Umbrellas to allow those who wish to comply with law to be able to compete fairly with one another.”