After the Pre Budget statement, the Treasury released this statement
5.104 Following the consultation Tax relief for travel expenses: temporary workers and overarching employment contracts, the Government have decided to leave the current rules unchanged. However, in the light of evidence from the consultation confirming poor levels of compliance in this area HMRC will refocus its efforts to ensure that the current regime is properly applied. If compliance does not improve, the Government may return to this at a later date.
Catching Renegades
So, it looks as if those consulted have managed to convince the Government not to legislate on this.
The focus is going to be on catching those companies that stretch the rules on expenses beyond the boundaries.
The Government has also said that they could re-look at it again in the future if those at the edge aren’t reined in.
However, this is very good news for both IT Contractors and Umbrella Companies.
If the Government had changed the rules on that the Umbrella Companies could just have become payroll companies.
Great News
Said Rob Crosland of top Umbrella Company Parasol:-
This is great news for contractors who work for Parasol and means that the risks that contractors take in finding work, traveling and working hard have been recognized. Treasury goes on to suggest that HMRC will refocus its efforts on ensuring poor levels of compliance are addressed - a measure Parasol wholeheartedly agrees with and promoted as the correct solution through lobbying and consultation directly and via the Service Providers Association (SPA).
Parasol has always promoted the accurate and ethical claiming of expenses and has never put contractor’s livelihoods at risk. In some ways, the news in today’s PBR vindicates that stance.
We will continue to work with HM Treasury and HMRC to ensure contractors and freelancers unique place in the UK economy is recognized and understood. We welcome this sensible approach by the Government in times which are already challenging enough.
PCG
The Professional Contractors Group put out a statement saying the following:-
There was good news, however, for freelancers concerned at the prospect of aggressive legislation on umbrella companies' and agencies' expenses. Mr. Brazier said: "PCG advised the Government not to pursue either of the courses of action it proposed - we are pleased that it is focusing on making the existing rules work properly as we recommended."
According to Compliance Manager, Mike Grey, at Umbrella Company Paymasters:-
"This is excellent news for contractors and quite rightly recognizes and rewards the entrepreneurial spirit of contractors in seeking out new work and traveling to and from varied assignments. Often contractors do incur significant costs for travel and/or overnight stays and it is only right that these should be recognized in calculating their tax liability".
"In the past the industry has been criticized for encouraging contractors to claim for all expenses they could be entitled to just to minimize their tax liability. Clearly this practice is wrong. At Pay Matters we feel it is important that relief for expenses are claimed but only when they are incurred "wholly, exclusively and necessary in performing your duties". Clearly traveling to a client's premises is often critical for the work to be performed and correctly supervised by the client".
360 Groups
Brian Keegan, MD of 360 Group says;
"This proves that government has listened on this occasion and that maintaining a flexible working model is key to seeing UK PLC through these challenging times".
Keegan goes on to say "Following the consultation Government now has a better understanding of the vital role umbrella organizations play and that umbrellas do not exist purely to provide tax savings to workers. Umbrella providers now have the opportunity to prove that we have a legitimate place in the economy and demonstrating ongoing compliance with HMRC rules is essential.”
360 group, like other interested parties has been heavily involved in the consultation process and sought to provide feedback from agencies and end clients to Her Majesty’s Treasury about the real benefits professional employer organizations can provide.
If anyone would like a copy of the 360 group consultation submission October 2008 please email Toni Carter on t.carter@360-group.com.
Danbro
Said Damian Broughton of Danbro:-
"Contractors will particularly welcome the decision not to change the rules on expenses. If they operate through an umbrella company, choosing one with 100% HMRC compliance status, like Danbro, will give them confidence that their expenses arrangements will meet with the taxman’s approval.”
