Until the rules which govern tax relief on travel and subsistence are changed, labour providers will continue to take advantage of them.
Travel and subsistence rules remain incredibly relaxed in the
Last year HMRC issued a consultation paper on temporary workers and the travel rules. It has not made any changes to the law, but it would like to clamp down on any schemes where the travel rules are generally used to substitute taxable pay with tax deductible expense contributions. It also has its sights on salary sacrifice and mis-use of PAYE dispensations.
It has issued “Use of labour providers. Advice on due diligence” which is clearly aimed at trying to warn businesses about using labour providers such as agencies which try and circumvent tax and NICs rules, amongst others.
As yet it has not issued anything which is directly applicable to professional contractors and the like, but many umbrella company schemes make ample use of dispensations so we might expect some changes in the future (if HMRC can only work out quite what would work).
Salary sacrifice is a potential problem in the SME sector (too many accountants not giving the right advice). I have updated both Practical Tax Guides on Flexible Working and Salary Sacrifice so that your clients do not fall into the Revenue's lap on this one.
