Government legislation to deny Travel & Subsistence tax relief for contractors and freelancers will have a significant impact on British business and the very many companies which rely on the flexible workforce for its expertise and skills. This warning is issued from The Freelancer & Contractor Services Association (FCSA), the UK’s leading independent trade body for umbrella employers and accountancy service providers supporting the flexible workforce. For the past 18 months, FCSA has been campaigning on behalf of contractors, recruiters and end-hirers to ensure the policy does not become law.
FCSA is keen to point out to end-hirers in UK plc that if the legislation goes ahead there will be fewer workers willing to travel to assignments which will, in turn, create a skills shortage. This will undoubtedly lead to higher assignment rates to attract the appropriate workers to fulfil the temporary need of a project and contractors and freelancers will be forced to increase their rates to take the travel and subsistence costs into account.
Julia Kermode, CEO of the FCSA said: “If the Government goes ahead with its plans to abolish T&S tax relief UK plc will suffer; businesses will have less expertise at its disposal and will have to pay more for those skills which they currently rely on so heavily to fill a specific need. I think the impact needs spelling out and companies need to know what the knock-on effect of the removal of T&S relief will mean for them – they will be footing the bill. I would urge businesses to get on board to support us and the contractors upon whom they rely so much.”
Recent statistics published by the ONS revealed that UK productivity in 2014 was 20 percentage points below average compared to other major G7 economies. Julia Kermode added: “The UK’s continued shortfall in productivity levels will be of major concern to UK employers and its workforce. An organisation’s ability to be flexible and agile – already acknowledged to have been vital to the UK’s resilience within the downturn and recovery to date – must be of paramount importance to UK plc. So, I simply cannot understand why the Chancellor wants to penalise the very workers and the companies that hire them by removing T&S tax relief.”
From April 2016 the overwhelming majority of temporary workers will be unable to claim T&S relief. That will inevitably see a cut in their take home pay. For lower paid workers this will hit them hard. It will be a challenge to get the message across to these workers that this is an HMRC enforced change and not the fault of recruitment agencies or intermediaries.
- It is widely accepted that the temporary workforce is an asset to the UK economy. Working in this nature is of benefit to workers – allowing them to manage their own time and employment choices, and to hirers – allowing them to retain the flexibility that is so often vital in today’s climate. The abolition of the ability to claim T&S relief will damage this workforce and the benefits that it confers. It may be that, with little incentive to carry out a series of temporary assignments, workers look to securing more permanent employment.
- Particularly concerning is the effect on highly skilled workers who often have to travel significant distances in order to provide their services. Often such workers have to expend significant sums on travel and subsistence – there will be no incentive to do so if they are unable to claim relief. This will leave employers with a skill shortage or a much higher wage bill.
- The proposal to base the test upon whether T&S relief can be claimed upon the Supervision, Direction or Control (or right of) means that hirers, agencies and intermediaries will be faced with the administration of a complex and uncertain test which will be open to interpretation. Given that SDC is to be deemed where there is a worker providing personal services through an intermediary it will be necessary to prove a negative in order to access T&S relief. We believe that this will be a significant disincentive to accessing the relief where it is properly due.
- If the transfer of liability provisions make the end client/hirer jointly liable for any incorrect claims of T&S this may cause tensions between the various parties along the supply chain where there is disagreement as to whether SDC applies.