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T&S expenses for many umbrella workers. The government says its proposals are aimed at cracking down on tax avoidance that costs the Exchequer at least £400m a year. However, the sector is not taking the proposals lying down, with stiff opposition being voiced to the government’s latest ideas on how to crack down on such abuses. Umbrella practitioners and professionals working in and around the sector have variously described the government’s proposals as “unworkable”, “a quick and rushed response” and “a blunt instrument”. They argue that the measures will fail to achieve the government’s objectives, damage the flexibility of the UK’s labour market, and only lead to yet further legislation. The proposals come against a backdrop of bad publicity about the activities of some umbrella companies, which have been accused of encouraging workers to claim for non-existent expenses, paying workers below the national minimum wage (NMW), avoiding tax and National Insurance Contributions (NICs), and charging workers excessive administration fees. Such abuses by both umbrellas and recruitment agencies were highlighted in a Channel 4 Dispatches programme in January. John Chaplin, director, global employment tax services at professional services firm EY, says he expects there to be a formal consultation, after which draft legislation would follow. “Probably coming into effect in April 2016,” adds Kevin Barrow, a partner in the advisory group at law firm Osborne Clarke. An HMRC spokesperson says: “We
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are currently considering responses to the discussion paper. The responses will be considered and used to inform firm action at Budget 2015.” Julia Kermode, chief executive at the Freelancer & Contractor Services Association (FCSA), a trade body representing 11 of the UK’s largest umbrella companies, accepts “there are some umbrella firms out there that are acting less than ethically, and that their actions are tarnishing our sector”. Kermode puts the case for why umbrella workers, which the FCSA estimates number between 300,000 and 400,000, should be able to claim tax relief. “The problem is they don’t have that ongoing stability of employment that a permanent worker has, which is why we feel it is fair for them to receive tax-deductible expenses.” She argues that if tax relief on T&S expenses for umbrella workers were to be removed this would lead to a reduction in their take-home pay. And with little prospect of a rise in assignment rates to compensate, such workers “may be less willing to travel”, Kermode says. “That’s why the government’s solutions are unworkable,” she adds. Andy Gunson, finance director at Optionis Group, whose brands include umbrella firm Parasol, agrees that one outcome of removing relief could be for umbrella workers to confine themselves to looking for jobs in their local area. “This is going to impact the flexible nature of the UK workforce at the professional end of the market,” he says. According to FCSA research, umbrella employees travel 35 miles a day on average, claiming travel
Julian Ball
Kevin Barrow
John Chaplin
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APRIL 2015
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12/03/2015 11:32