Employment Intermediaries; Temporary Workers relief for travel and subsistence expenses. Alan Nolan

Transcription

1 Employment Intermediaries; Temporary Workers relief for travel and subsistence expenses Alan Nolan

2 Introduction to Aspire Aspire was formed in April 2009 based in Barnt Green, Birmingham. Four distinct businesses Aspire Business Partnership LLP Tax and Benefits (TABS) Limited Aspire Corporate Solutions Limited Alan Nolan Productions Limited Aspire to Comply Working with Employment Businesses Agencies and Umbrella companies to promote a compliant supply chain. Specialists in providing advice to the intermediary sector and construction industry.

3 Agenda Previous Consultation 2008 Review of discussion document published on 16 th December 2014 Consider the proposals put forward by HM Revenue and Customs Consider the implications surrounding each proposal What are the likely outcomes? YOUR VIEWS FRIEND s VIEWS ALSO ACCEPTED! Next Steps

4 Consultation What influences workers to use umbrella companies? What influences agencies to use overarching contracts of employment? Potential problems with overarching contracts evidence of poor compliance. Mis-use of dispensations encouraging workers to claim expenses not genuinely incurred. Collection problems for HMRC umbrella companies have no tangible assets. Exploitation little choice for the worker.

5 Consultation Proposals Allow existing arrangements to continue but to introduce legislation to tackle non-compliance. Removal of tax relief for travel expenses. Leave legislation in its current form.

6 Government s stated approach informed by consultation Confirmed that overarching contracts of employment offer benefits i.e. low risk alternatives to running a limited company/genuine employment rights. Removal of tax relief would remove umbrella companies from the intermediary market behavioural change causing loss to Exchequer. Consistent treatment of dispensations and scale rates will improve compliance. Negative effects of changing legislation outweigh the benefits and would have unintended consequences.

7 Government s Stated Approach - December 2008 HM Revenue and Customs will re-focus 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. Broadly it was a Bridge too far in view of the world recession.

8 Review of Discussion Document Clear change in emphasis demonstrated by the use of strong language Exploit 7 Misuse 10 Unfair 13 Avoid 17 Change in the political landscape

9 Review of Discussion Document Government committed to addressing unfair practices in the temporary labour market - NMW, Offshore Intermediaries, false self employment. Government can not stand still on tax avoidance. Increase in the use of overarching contracts to exploit the tax rules for travel and subsistence costing the Exchequer at least 400m per annum from umbrella companies alone. Top 50 umbrella companies employed 150,000 individuals on OAC s in 2013/14.

10 Review of Discussion Document Key Aim to inform the government s decision at Budget 2015 on how best to address this avoidance whilst ensuring that arrangements that do not seek to exploit the tax rules are not affected. Implementation 2016 at the earliest. Government will consider emerging themes from on-going reviews by BIS and OTS and reflecting on responses from discussion document.

11 Review of Discussion Document Government s Interpretation Overarching Contracts of Employment ( OAC ) are used to take advantage of the temporary workplace rules. Umbrella s are not the organisation which directs the employee in their day to day tasks. Employees engaged under an OAC are in a position to pay less tax than a worker under traditional arrangements - unfairness. Umbrella fees mean there is a marginal or negative effect for the worker levies a direct fee on its employees for its services.

12 Government Interpretation Umbrella companies market themselves on the basis that they allow workers to claim expenses. Umbrella companies operate non-compliant models i.e. Pay Day and exploit confusion over employment status. NMW avoidance employee v self employment. Lack of transparency complexity of payslips, lack of knowledge of how or what they are paid. OAC s create benefits enhanced set of rights (redundancy and unfair dismissal).

13 Government Interpretation Reasonable to conclude that when solely considering payment and process simplification, the use of OAC s may merely result in a shuffling of payments and process obligations.

14 Government s Case for Action Level the playing field between businesses that mis-use the tax rules and those who don t. Individuals do not make an informed choice on schemes which do not benefit them. Negative impact on the low paid who do not claim expenses and incur a fee. Dubious practices by employers using OAC s expose individuals to potential large tax liabilities.

15 Initial Observations Umbrella companies do not take a fee margin. Payslips are difficult to understand. Umbrella s should improve communication with employees to ensure that an employee is no worse off in comparison to a worker under a standard worker contract with the agency. Umbrella s should embrace the role of employer and not adopt the stance of a payroll business. Umbrella s should know the whereabouts of their employees demonstrating control through improved communication with the employment business.

16 Potential Options Number One Introduce legislation to amend the rules on travel and subsistence payments tax relief removed for travel between home and the workplace of the end client for those individuals engaged under an OAC by an employment business to work for a third-party. Impact on PSC s Mobile employees consultants and meter readers. Alternative structures incentives to work through limited companies.

17 Potential Option Number Two Restrict the availability of tax relief for travel and subsistence for travel and subsistence where the individual is employed by an intermediary specifically under an OAC. OAC s could not be used to create temporary workplaces. Extension of general tax relief exemption for agency workers shelved on the basis of cost.

18 Into the Mix.. BIS internal review of employment status i.e. what it means to be an employee (next steps to Ministers by March 2015). OTS review of employment status for tax purposes report expected Budget NMW enforcement changes. Drains up review of travel and subsistence rules. Finance Bill 2016 changes, salary sacrifice, scale rate exemptions, payrolling of Benefits-in Kind.

19 Over to You. Summary of Discussion Questions page 25 Question 5 Question 11 Question 12, 13 and 14

20 Next Steps Prepare your response by 10 th February Alternatively, provide your responses to Aspire and we will incorporate them into our response. Think logically remember false employment and encouraging false claims to expenses is against the law. Think about how umbrella companies can avoid being labelled tax avoidance by improving transparency, training and better communication. Provide Government with a good arguments and an embrace the need for change. Is there a need for a umbrella company Trade Association?

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