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If we are to determine what to make of the government’s scrutiny of IT contractors’ travel expenses , it makes sense to first look at the logic underlying the circumstances in which tax relief on travel expenses can and cannot be claimed. It has always been the case that one could not claim for the cost of travel to and from a permanent workplace. And there’s sound logic behind that – if one knows where one is going to be working long-term, then one has the choice and the chance to base one’s home and settle in a location from which the workplace is reasonably accessible. Temporary workplaces, on the other hand, are a different matter. Moving home for a temporary workplace is a less realistic option – particularly where there is also a family and other commitments. So there is also sound logic for saying that making the expenses of travel to and from a temporary workplace should properly be deductible. And if the engagement becomes long term, there is also logic for saying that there should be a point at which the deductibility of those expenses should cease, because the engagement has to all practical purposes become ‘permanent’ – at least permanent enough for the individual to take the decision to move home to a more convenient location. The current temporary workplace rules were introduced – by this government; let us not forget – in 1998.They clarified the grey areas, and left us knowing where we stood. They have worked well, and are generally accepted as reasonable and fair. These rules have to my mind been a significant element amongst the various factors which have encouraged and stimulated the growth of the pool of expertise commonly called ‘contractors’, who have chosen to take control of their own careers in their specialised niches, and take the variety of relatively short-term engagements offered by their career choice. In return, the nation’s economy has gained significant advantage from this flexible and highly skilled pool of technical expertise. If, as I suggest, it is in the interests of the economy that individuals (a) choose contracting as a career path, and (b) should be willing to travel wherever their expertise is required on a short-term basis, then it follows that tax relief should remain available for that travel. The umbrella company is one of the realistic options available to the person who has made such a career choice, and for such a contractor, the logical contractual structure for a relationship which is intended to last from one engagement to the next is an overarching contract. The government’s present complaint, as expressed by the Treasury, is that ‘umbrella companies and some agencies make use of overarching contracts of employment, which enable some temporary workers to gain tax relief for travel expenses not available to others working in similar circumstances’. Sounds OK? – Until you realise that the only reason that such tax relief is not available to others working in similar circumstances (such as agency workers, not engaged under an overarching contract) is that the current legislation has been drafted in such a way as to specifically exclude those others. Now, the fact that some may have been specifically excluded is no justification for also specifically excluding everyone else. Perhaps we should instead be looking at whether the specific exclusion of agency workers is in fact justified? If one starts from the viewpoint that it is reasonable for a person who has made a career choice to work at a succession of temporary workplaces – each for a limited time, or for a limited purpose – to have tax relief on travel expenses, as some compensation for the fact that (s)he may be working far from home, but without the security of a permanent position that would justify a move of house, then the real injustice, the real artificiality, that emerges is that it is only those on overarching employment contracts who are entitled to that tax relief. That, I would suggest, is the point that the government should be addressing. But somehow I suspect they won’t, because the real agenda is not the redress of injustice, but the simple raising of more taxation. The real problem we face here is double-speak; it is clear from the language used, and from the general pitch of the consultation paper, that the government has already made up its mind: it wants to raise yet more taxation, and has found yet another target at which to aim. Roger Sinclair is a legal consultant with Egos, an IT contractor advisory. Jul 24, 2008 Email this article Printer friendly page Previous Page
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