Temps face travel expenses clampdown

HMRC have taken the latest step in their review of the use of overarching contracts (OACs) in the temporary labour market to take advantage of rules for travel expenses.

Revenue officials believe the use of OACs by some employment businesses and umbrella companies allows temporary workers to benefit from tax and National Insurance relief on home-to-work travel expenses

The department has published a consultation document that sets out two options. The first would amend tax rules to the effect that individuals engaged under an OAC by an employment intermediary to work for a third party would not be able to claim tax relief for travel, and associated subsistence, from their home to the workplace of the end client.

The measure could be achieved by determining that – where the individual is supplied through a third party – the workplace of the end client would in all cases be a “permanent workplace”. No relief for travel from home to work would be available. The rule would apply whatever form the third party took, and would not change the position of individuals directly employed by employers for short periods because they are currently treated as working at a “permanent workplace”.

The alternative option outlined by the consultation would restrict tax relief for travel from home to workplace and associated subsistence costs, where the individual was employed by an intermediary specifically under an OAC. The proposal could be accomplished by stopping the contracts being treated for tax purposes as giving rise to a series of temporary “employments” under a permanent contract.

Responses should be emailed no later than 10 February.

Issue: 4485 / Categories: News , Employees , Income Tax