Treasury set to review employee expenses

A review announced by George Osborne at Budget 2014 to scrutinise the tax rules on travel and subsistence expenses will open this summer, allowing affected parties to have their say.

In an update to its website, the Treasury explained it would make good on the chancellor’s promise by soon inviting views on when such employee expenses should attract tax relief.

Hailed yesterday by an umbrella company boss as a “golden opportunity” for his sector, the review will tackle the “error, misunderstanding and concern” that the current rules cause.

The Treasury added that while the review should unearth a new system that reflects modern working patterns, it does not intend to provide relief for private travel or ordinary commuting.

But it is willing to explore new principles and methods for determining when travel expenses should be tax deductable, and wants a “particular focus” on employment intermediaries.

Consultations on the OTS’s four accepted simplifications -- voluntary payrolling of benefits, scrapping the £8,500 threshold, a trivial benefits exemption and a general one, will also run.

They will be accompanied by a call from the Treasury for evidence on modern remuneration practices, to ensure the tax system, and any future policy changes, is keeping pace with them.

Yet it is the review of the expenses system which is being welcomed the most, as this longer-term exercise has the potential to modernise the rules while making them harder to flout.

“This is a golden opportunity to create an expenses system that works for all parties,” reflected Derek Kelly, managing director of contractor umbrella company Parasol.

“It’s no secret that some unethical umbrella companies encourage contractors to submit round-sum allowance claims in order to maximise their own profits.

“This places contractors at risk of an HMRC investigation and in our view is wholly unacceptable. Hopefully this summer’s consultation will be the first step in the creation of a fairer and more sensible system.”

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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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