Changes to legislation affecting T&S (Travel and Subsistence) Expenses for contractors working through Umbrella Companies and PSC’s.
We want the contractors’ voices to be heard so that the Government and HMRC gain a full understanding of the sector and the integral role that contractors play in keeping the economy moving in the right direction.
So what do the contractors think so far? Let’s take a look at some of the responses to date…
If the T&S expenses were withdrawn it would lead me to not look for contracts which are based in a separate part of the country from where I live. The expense of having to stay away from home but receive no tax relief on those expenses would be too much income to lose. This can’t be good for either myself or for the end clients who may be desperate to get the experience that contractors provide with their services.
James – IT Contractor
I am currently contracted for a government department who can not get enough technical resources locally. So 70% of the technical personnel are from a minimum of 50 miles away. Permanent employees get their expenses including hotel bills paid directly from the government. Contractors have to pay their own expenses from their rate. If this law comes into being then government departments and other public sector bodies will have insufficient technical resources as people will not commute daily or weekly.
Olly – IT Contractor
I travel all over the country to take up contracts, despite the fact that I live in Cheshire. I cannot move because both my wife and daughter have ME and that kind of upheaval would be disastrous to their health. I spent 15 months working for a client in Scotland. That client could not source the people locally to meet their contractual obligations with their client. They therefore had to identify contractors from all over the UK to fill the gap. With a 500 mile round trip, meals and accommodation, most contractors, myself included, would not be able to fill these roles as the costs and taxes would be uneconomical. I believe that I would be outside of the direction and control aspects of the proposal, but quite frankly the lack of certainty would prevent me from taking the chance. Perhaps the playing field should be leveled to include MPs who are not, in my opinion, self employed, but are allowed to claim expenses for travel well above those allowed for mere contractors.
Geoff – IT Contractor
Restriction on the ability to obtain tax relief on travel, secondary accommodation and subsistence are going to have a crippling effect on my earnings obtained from working as a locum for the NHS. Not being able to reduce my costs associated with working all over the UK for different NHS trusts during the financial year will make my availability for work greatly reduced, as I will be forced to cut down on my travel expenses meaning that I will only be able to work locally to my current home. This is not good for me, but also for the employers looking to attract candidates to more distant locations across the UK. No tax relief will only punish the actual temporary contractors, who will have their earnings reduced and might stop locuming all together. This will put an additional strain on the employers struggling to fill short-term posts. The ever-rising costs of living make every job less worth-while, when the salaries are not being increased or when the tax relief options are being reduced. Currently the NHS is struggling to find skilled Healthcare workers, mainly because there is a shortage of professional in the current job market. Rather than recruiting nurses and doctors from abroad, perhaps you should think of all the temporary workers in the UK, who are currently helping to keep NHS services running and afloat. Making it more difficult for temporary workers in all professions to be able to work in such a demanding set-up of short term contracts can potentially stop new candidates wanting to work in such a way. You should give people more flexibility in terms of arranging their own employment, rather than restricting it even further. The HMRC should focus on recovering more tax from the large corporations that so effectively avoid paying billions of pounds. Instead your are going to squeeze honest working and earning professionals, who do not try to avoid paying tax, but are looking for a bit of help due to the requirements of being a temporary contractor. We still pay our income tax and what we save on expenses is PEANUTS! It would probably cost more in administrative costs to recover it than it’s worth. Leave over-arching agreements in place.
Macieij – Locum Contractor
This is simply crazy legislation. It means that many contractors will not accept assignments where overnight accommodation or long commutes are concerned, as pay will be seriously eroded. This, in turn, will seriously stifle the UK economy which desperately needs to re-invest in large IT programmes after many tears of under-investment during the recent financial crisis. All UK areas North of London will be disproportionately adversely affected, as the pool of expertise is more geographically-remote from where most of the work is centred.
Chris – IT Contractor
My end client requires me to make occasional trips to locations in the UK and abroad. If I lose tax relief on expenses incurred, this could leave me out-of-pocket by multiple thousands of pounds.
William – IT Contractor
People should only claim tax relief for travel costs when they travel for work; i.e. from their real place of work to their temporary workplace (e.g. visiting a factory site away from their main place of work). The legislation in this area was to my mind always quite clear and had been the same in spirit for many, many years – if employees, temp or perm, travel to another site temporarily for work away from their main place of work (i.e. where they really work ordinarily every day) they can claim for the costs if their employer doesn’t repay them that cost. Any other arrangements where temps claimed for travel beyond this (for example somehow claiming the cost to go to work every day) would have been artificial to my mind and if the government is cracking down on that kind of abuse then I am in agreement with the government.
I write to express my grave concern the effect the changes to travel and subsistence allowances announced in Budget 2015 will have on the Service industries. I believe the initial effect will be twofold. First, people who currently rely upon allowances may choose or be forced by their loss to withdraw their service due to increased cost burden. I count myself among those individuals who will be bound by those considerations. Second, as the market will invariably have to adjust, costs to UK businesses will increase, which will undercut UK output and competitiveness. This will likely drive down demand for services and amplify the first effect. I would regard this as serious impediment to my livelihood. Successive UK governments have sought and promoted an adaptive and mobile workforce as a vital ingredient needed for a vibrant UK economy. This announcement quoshes that position entirely. I urge the government to reconsider with utmost haste.
Phil – IT Contractor
I’m unsure if I understand the budget changes properly, but if it means that I would lose the right to claim tax relief on what is in effect a direct cost that should not involve tax at all then it seems extremely unfair. Do not think that this is some sort of way of earning tax-free money as a contractor. In my own case as a contractor I have not claimed any travel or expenses of any sort in the past 4 years. I claimed some in the previous year to reflect direct travel and subsistence costs for a specific project that involved a few days travel away from my working base as part of a bigger contract. Contractors should be treated the same as anyone else; when there’s an expense as part of a contract (or employment) then it should be properly paid. Stability for contractors would also be a very welcome. Yes, it wouldn’t surprise me if a tiny percentage of contractors abuse the system. But personally, I’m not aware of any and I think those days were left 20+ years ago. There’ll always be some who abuse whatever system is put in place. But most just do a great job often in very skilled roles. I fill a role earning millions for a UK company with 100% exports to every corner of the globe. It is a role that cannot seem to be easily filled by the company I’m contracted to. I started contracting in 1987 and left in 2001 because of the lack of stability created by the constantly changing regulatory goalposts. I left for a period lasting for the next 9 years – a period where I didn’t earn a single penny in exports, where I reduced my employment activity and paid a fraction in tax compared to previous years. Since 2010 I’ve worked in contracting again, earning large amounts of money for the UK economy and paying a large amount in tax, and as I operate through a reputable contractor umbrella company it’s all straight PAYE tax.
My Umbrella company invoices about £7,500 per month for my services (incl VAT at 20%, another DIRECT tax on my efforts). After take-offs (Employer’s NI, Employer’s NI and Income tax and my travelling and subsistence expenses) I net about £3200, LESS THAN HALF of the gross. The Government’s take is more than I net. If travel and subsistence came out after tax and NI, my net would be down to about £2200, i.e. not worth the effort of travelling and staying far from home on top of working long and often stressful hours, I am nearing retirement and during my 40+ year working career (25 years as permanent staff, 15 years contracting) and I have seen Government empowering HMRC to steal more and more and more of my hard earned cash. I was contemplating doing some winter work during my retirement which would generate a worthwhile amount of extra tax for HMRC. If travel and subsistence costs are taxed for my working at a non-permanent location it will MOST DEFINITELY NOT be worth my while so I won’t work at all and they will get NO EXTRA TAX. The Government will be “cutting off its nose to spite its face”. Hmmm. Nothing new there then! If HM Government don’t allow for reasonable travel and subsistence for contractors they will loose out in the long run. I would now rather not work and not pay taxes than be taxed on travel and subsistence costs where there is no opportunity for a PERMANENT place of work. Even then, the cost of relocation for any new staff job carries with it heavy costs and taxation in the form of Stamp Duty and VAT, and a very high risk of the job NOT being permanent. We need taxation rules which encourage people to find work and provide our industries with a substantial skilled and flexible workforce. Tax avoidance by the super rich has never been tackled properly by any UK government. It is much easier to have yet another go at the middle class worker. It is every working person’s DUTY to minimise the tax they pay and provide the best for their families. Before considering removing travel and subsistence allowances for non-permanent contract workers, HM Government and HMRC should be: – removing all travel and subsistence allowances for UK and European Members of Parliament. They DO have a PERMANENT and NORMAL place of work. -get their act together and tackle the really wealthy who pay little or no tax. Also, they should look at some of their fraudulent taxations: We all pay 20 % income tax on the pathetic 1/2% or so interest on money in our current or short term savings accounts, even when inflation is at 2.5% or higher. So, we pay tax on a devaluing currency, and who controls inflation? Hmmm. Smells like a scam to me. Capital Gains Tax is another fraudulent tax when levied without a complete and full allowance for REAL inflation. If I bought a property for £100,000 ten years ago and sell it now for £180,000 I haven’t made an £80,000 profit at all. The £180,000 now won’t buy anything more than the £100,000 did ten years ago. All that has happened is the £ has been devalued; and who controls inflation? Hmmm. Smells like another scam to me. Whilst I am happy to accept that the only certainties in life are Death and Taxes, taxation must only be on NET WEALTH GAIN, not gross income, otherwise the whole system will simply bleed to death.
Tony – Oil & Gas Contractor
I think you could have explained what the changes mean rather than ask us to look for a needle in a haystack. I am happy the the government is trying to tackle abuses and I am happy that Contractor Umbrella always tries to work within the regulations. I can understand that people in low earning professions might be affected unfairly if their job involves a lot of expense but from the details you give I cannot tell. No one in IT should whinge.
Niall – IT Contractor
I feel under attack. I am operating through an umbrella company paying PAYE, living away from home through the week and earning around 40k annually. I took a contract to get out of unemployment. I am now facing the prospect of being poorer. I am not a tax avoider. I don’t have permanent job. My end client doesn’t want permanent staff for this job. All this change will do is make some contractors seek ever more complex ways to avoid tax and it will no doubt leave me out of pocket. Where is the fairness in all of this?
Mark – IT Contractor
It is clear both Labour and Conservatives are out to get those who take the risk to work on contract basis, there is an unrelenting cycle of tightening of tax restrictions against the very people the government should be nurturing. Contractors are mobile, motivated and highly skilled, they are just the people the UK needs in a knowledged based global ecconomy. The continued uncertainty in tax regulation and being self-employed leads me to four conclusions… 1. The government no longer wants any temporary workforce, they wish to force everyone into full-time employment. 2. The government is completely out of touch with the risks and uncertainty that faces a highly skilled knowleged based worker in today’s economic climate, especially training. 3. The government is satisfied if you run a company under their definition – but there is no certain guidance let alone incentive to move from contractor to ‘business’. 4. In trying to catch rogue employers of the unskilled workforce the government is more than happy to throw the baby out with the bath water. As an IT contractor of 20 years standing I am currently looking at working in Gibraltar as an alternative option.
Mark – IT Contractor
Temporary work is often taken at locations long distances from home. A contractor takes on this work as they are aware that it is for a finite period of time. They would not choose this as a permanent job given the travel involved and would either find work closer to home or move closer to the Location. 24 months is a reasonable period to assume that the location is now ‘permanent’ and it is unfair to remove tax relief up to this period. Highly skilled temporary contractors fill vital roles for companies and public bodies, managing and implementing improvement projects which, by definition, are for short durations. This is beneficial to the company (no need to hire permanent staff) and the contractor (flexible life style). Removing tax relief for travel would, in my opinion, affect the willingness of temporary workers to travel outside their home area, thus depleting the skill pool available to businesses looking for temporary contract staff to work on high profile and vital business improvement projects.
Terry – Other
The proposed changes will decrease the appeal of being a temporary worker.As a result more people will reject temp work, and thus leave the UK with a skills shortage that will put us behind most of Europe and if not the Globe. Having these benefits as a temporary worker should not be seen as a punishment. Let’s embrace our flexible workforce and drive our economy forwards.
Michael – Other
I have looked into this and I think it would be an extremely bad idea. Umbrella companies help out HMRC and the government out a lot. Us contractors don’t have the security of a permanent role, so this allows us to earn that little extra just in case. This may stop people from wanting to temp! Aimee – Teaching I am a senior programme manager, specialising in ensuring that the desired benefits from any programme are effectively realised (Benefits Realisation).I am currently helping with the major work at Sellafield, Cumbria associated with ‘cleaning-up’ what has been internationally recognised as an ‘intolerable risk’. Sellafield probably has the greatest concentration number of contractors associated with it, within the UK. It is however difficult to attract and retain suitably skilled expertise due to the lack of local skills and experience and the need to attract people from a much wider geographical area. The area suffers from poor transport links with the rest of the country, generally necessitating car travel and the need for local accommodation for those from outside the area. Recently the Public Accounts Committee (PAC), amongst other aspects, expressed concern over the rising and significant costs associated with the work at Sellafield. Against this backdrop, the government are proposing to disallow contractors from claiming travel and subsistence expenses against tax. The government persist with this action it is highly likely that the following would immediately result:
Contractor cost to Sellafield – and therefore ultimately higher cost to all UK taxpayers – will increase, as contractors will simply seek higher rates to compensate them for what would now represent additional expense (in my personal case it would require 10-15% extra salary per annum due to the costs of accommodation in the area and the approximately 670 mile round trips home- which I undertake usually monthly) And/or Rather than being a flexible mobile workforce, UK contractors will tend to become localised to their specific geographical area – and the considerable flexibility within the UK workforce as a whole will therefore be dramatically reduced. Likely to lead to all manner of delays if insufficient staff can be attracted to given areas. And specifically, the Sellafield clean-up may be delayed by being unable to attract contractors to the area. I therefore consider that the government proposal is ill-considered, likely to damage the UK not help it and urge that the proposal be re-worked or abandoned.
David – IT Contractor
The umbrella company i work with have helped me alot and being employed is a great help, the expenses make my work more viable and i would probably not take many roles if my current situation had to change.
Olujimi – Care Worker
I have worked with a number of umbrella companies in my three years of contracting, all of which have been incredible helpful with a number of issues. Firstly as a busy man it is an incredibly helpful for me to be able to leave all of my tax and NI deductions up to someone else, without having to worry about having to go through an accountant as my work is very much an ad-hoc basis and paying for an accountant and the maintenance fee for a few days here and there will mean the idea contracting will be significantly reduced. Also by being able to use my expenses ie petrol and food costs to reduce my taxes, means that i can afford to travel further a field and do not have to limit my self to a select distance when contracting. If new legislation is brought in i will no longer be able to afford to work as much as i live in rural community with few opportunities in the local schools. Therefor my contribution to the economy will be significantly less. Charlie – Teaching ill be well out of pocket. travel 180 miles to site every week and then pay for digs. ill not be able to afford to do that anymore.
Tony – Oil & Gas Contractor