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Temporary Workers – HMRC explains its current compliance activity
Wednesday, August 12th, 2009
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During 2008, HMRC consulted on the practice of employment businesses and “umbrella” companies to use overarching employment contracts to enable temporary workers to obtain tax relief on travel and subsistence expenses. Such contracts make it possible for tax relief to be obtained for costs incurred for commuting journeys, although such tax relief in not available under normal employment contracts.
As a result of the feedback from the consultation exercise, HMRC decided not to pursue changes in the law but to tackle abuses by increasing its compliance activity. As a result of this approach, HMRC has identified a number of concerns that are the subject of more detailed, ongoing investigation. These include:
- potentially ineffective overarching employment contracts
- dispensations which are invalid, or which have been wrongly applied
- not complying with the terms of the dispensation
- “expense payments” made tax-free without that level of expense, or in many cases any expense, having been incurred
- potential illegal deductions from workers’ pay
- ineffective and sometimes unlawful management processes; and
- breaches of national minimum wage.
HMRC intends to continue investigating and challenging non-compliant employment businesses and umbrella companies and will report to government ministers in due course on the extent of these abuses, with a view to a decision on whether further statutory measures are required.
Further information:
Revenue & Customs Brief 50/09 – Temporary workers: The application of Tax, National insurance and National minimum wage legislation
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