Industries unite to fight contractor expenses ban

Four professional bodies have set aside their differences to appeal for businesses to explain how the removal of travel and subsistence relief for contractors from April will affect them.

The CBI, on behalf of employers; the REC, on behalf of recruiters, the CIPD, on behalf of HR teams and the FCSA, on behalf of freelancers and contractors, made the appeal yesterday.

These four want PSC contractors and any other business affected by the removal, due to hit an estimated 750,000 workers, to complete an anonymous survey they have posted online.

The aim of the survey is to gather evidence “so that we can present a case to [the] government,” which has “significantly underestimated” the removal’s impact, says FCSA.

It is not the first time that officials seem to have misunderstood the removal’s impact. In July, HMRC took an initially small response to its consultation to mean nobody would be affected.

But current forecasts suggest that not only will three-quarters of a million professionals be caught by the removal, but that they will also be some £3,500 worse off each year.

The outfits they work at will be worse off too, because where the needed workers live far away, “the government expects business to pay a wage sufficient to attract” them.

This wage will be payable by the engager to the worker “without any special tax subsidy being necessary,” the government added in December, referring to the curbs to T&S relief.

The CIPD, REC and FCSA expect that the pressure on businesses to meet the cost will be “huge”, as does the CBI, which warns of an “increasing cumulative burden” on engagers.

Despite the concerns, the government said at Finance Bill 2016 that it expects the measure, due to raise £505million, to have only a “negligible impact.” Onlookers are stumped.

“We implore companies to tell us what the knock-on effect of the removal of T&S relief will mean for them,” said FCSA’s Julia Kermode, pointing to the survey, open until February 3rd.

“They [end-users] don’t seem to realise that they will bear the additional costs and they will not have the skills they need at their disposal.”

Her comments come after official figures showed that UK productivity in 2014 was 20 percentage points below average compared to other major G7 economies. 

The FCSA reflected: “The UK’s continued shortfall in productivity levels will be of major concern to UK employers and its workforce and the impact of removing Travel and Subsistence tax relief will exacerbate the situation.

“It seems that the government is simply paying lip service when it claims to value the freelance workforce, otherwise it would not be going ahead with this legislation that will penalise this group of workers and the companies who benefit from their niche skills. There is no joined-up thinking in the government’s approach and the UK economy will suffer.”

Editor’s Note: Related Reading –

Umbrella contractors, now’s the time to probe

Contractor tax relief ban ‘to sink 45,000 PSCs’

Contractors’ Questions: Who’s liable if I claim expenses but am ‘SDC’?

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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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