CONTINUEThis site uses cookies. By continuing to browse this site you are agreeing to our use of cookies. Find out more.
  1. Front Page
  2. News By Topic
  3. Plans To Cut UK Workers' Travel Tax Relief Criticized

Plans To Cut UK Workers' Travel Tax Relief Criticized

by Robert Lee,, London

06 October 2015

Trade body Prism has warned that the UK Government's plan to restrict tax relief for work travel threatens 1.6m temporary workers with a 20 percent pay cut and could cost UK employers nearly GBP7bn (USD1.6bn).

The Government has proposed the abolition of the home-to-work travel and subsistence tax relief in the case of workers employed through an employment intermediary and under the supervision, direction, or control of any person. According to an HM Revenue and Customs (HMRC) consultation document, "These proposals are part of a strategic approach to clarify the differences between employment and self-employment, and the use of employment intermediaries. [They] will ensure those who are in an employment relationship are taxed as employees, on a fair and consistent basis."

Crawford Temple, Chief Executive Officer of Prism, said: "The taxman is going to war on temporary workers and contractors. These are people for whom there is no normal commute as they move around different workplaces, sometimes working for dozens of companies a year over a wide area. These workers have always been able to rely on claiming travel expenses from home to temporary workplaces and that has been one of the few benefits of being a contractor.

"We estimate a 20 percent shortfall in take-home pay if HMRC brings these changes in. The burden will be borne by Britain's employers and the lowest paid as a gap in pay emerges overnight. The most flexible part of our workforce will become the worst off with the fewer benefits and the least protection."

According to Prism, the proposals will mean that permanent employees are still able to claim travel expenses, while the contractors who work alongside them are not. It estimates that employers will need to spend 25 percent more on contractors to maintain rates of take-home pay. It calculates that, based on average UK earnings, this could cost employers GBP6.9bn.

Temple added: "These changes are cynical because they are totally unfair to the contractor who has fewer employee benefits, no job security, no sick or holiday pay and no company pension. Rules to tackle workers who do not deserve travel expenses already exist but HMRC find it easier to penalize everyone rather than go to the trouble of enforcing them. UK Plc overall will become less competitive, struggling workers will pay more tax, and employers will face higher costs at a time when budgets are under severe pressure."

"We are not defending people who behave like employees but disguise themselves as contractors. Travel expenses for itinerant workers are a huge and unpredictable expense. Ministers are reaching into the pockets of those with the least job security and cutting the amount they take home by 20 percent overnight. It's an utter shambles at a time when the most flexible section of our labour force are key to the economic recovery. When you risk disposable incomes or burdening industry with colossal costs you put that recovery at risk."

TAGS: tax | employees | budget | United Kingdom | payroll | contractors | self-employment | tax breaks | tax reform | trade association | trade | services

To see today's news, click here.


Tax-News Reviews

Cyprus Review

A review and forecast of Cyprus's international business, legal and investment climate.

Visit Cyprus Review »

Malta Review

A review and forecast of Malta's international business, legal and investment climate.

Visit Malta Review »

Jersey Review

A review and forecast of Jersey's international business, legal and investment climate.

Visit Jersey Review »

Budget Review

A review of the latest budget news and government financial statements from around the world.

Visit Budget Review »

Stay Updated

Please enter your email address to join the mailing list. View previous newsletters.

By subscribing to our newsletter service, you agree to our Terms and Conditions and Privacy Policy.

To manage your mailing list preferences, please click here »