Contractors can have their say on benefits and expenses

A recruitment body yesterday alerted contractors, agency workers and limited company owners to a new report which will likely lead to changes to the rules, administration and processes governing their benefits and expenses.

Published by the Office of Tax Simplification, the interim report already identifies some 43 ‘quick wins’ on how expenses and other tax dispensations can be dealt with, said the Association of Recruitment Consultancies (ARC).

Travel and subsistence is one major area reviewed in the report, following calls for “some tweaks to bring the rules up-to-date,” according to OTS chair Michael Jack, writing in the foreword of the 115-page document.

But Mr Jack signalled that the taxman’s administration of employee benefits and expenses, extending to the “widely misunderstood” P11D form and filing process, was more of a priority in the eyes of small businesses.

He said: “The [P11D] process is resource intensive both for employers and HMRC and is often driven by complex and frequently misunderstood rules as to what should or should not be included.”

Although the report states that identifying changes to simplify the P11D regime should be the subject of “further work”, the report, by itself, is a sufficient signal that a “wholesale review” of the current benefits and expenses rules is apparent, said the ARC.

“This will have a bearing upon how umbrella companies operate going forward,” added ARC’s chair Adrian Marlowe. “Recent calls for umbrella companies to be included in the Agency Conduct Regulations would be difficult to achieve given the nature of those regulations.

“However, simplification of the tax system would probably result in removing the risk for agencies relating to the more extravagant tax avoidance schemes currently on offer. Therefore, this review can only be good for agencies, workers and the recruitment industry in the long run.”

For its part, the OTS says it is not making recommendations at this stage, but is inviting input from those affected, particularly on the areas of Travel & Subsistence, HMRC Administration (including P11D), Accommodation Benefits and Termination Payments.

“We wanted to tackle the whole area of employee benefits and expenses because so many people were telling us how complicated it was,” reflected Mr Jack.

“Small businesses in particular don’t have time to read the hundreds of pages of HMRC guidance. They tend to muddle through until they get a nasty surprise after a visit from the taxman.”

Individuals wishing to have their say can submit comments to the OTS, before it embarks on the next stage of the review, which will follow the publication of its initial set of recommendations, scheduled for before the end of 2013.

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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