This summer will see the start of a review of tax rules on travelling and subsistence expenses, in which both sides can have their say. The review was first announced in the 2014 budget and should, according to the Chancellor, make good on his promise to invite a large number of different views as to which expenses should qualify for some kind of tax relief.
Across the contracting sector there have been a large number of voices claiming this should be seen as a golden opportunity for contractors and umbrella companies, offering as it does a stage on which to challenge the current rules and the misunderstandings and errors they cause. At the same time the Treasury has made clear it is looking to establish a workable system capable of reflecting modern work styles but that it is not looking to offer relief on ordinary commuting or on private travel. Therefore they will examine the methods and basic principles behind travel expenses deduction with a ‘particular focus’ towards employment intermediaries. They will also consult on the 4 simplifications of the OTS – the voluntary pay rolling of benefits, the scrapping of £8500 threshold and the trivial and general benefits exemptions. HMRC also wants contributors to offer advice on the changing nature of modern remuneration and whether the system is keeping up.
However, it is the expenses review that is the most significant as it offers the chance to modernise the system and also make abuse more difficult. Derek Kelly, the managing director of Parasol, a contractor umbrella company said of the upcoming review:
“This is a golden opportunity to create an expenses system that works for all parties … it is 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 a 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.”