The head of the UK’s largest umbrella company hopes that ‘unethical’ schemes will no longer be able to abuse the tax system, following news that the Government is to launch an in-depth review into the tax treatment of travel and subsistence expenses.
Travel and subsistence expenses regime to be modernised
According to the Office of Tax Simplification, this is an area which has, in recent years, been a cause of error, misunderstanding, and concern for employers”, and has led to a number of umbrella companies being criticised for encouraging their employees to claim ‘dodgy’ expenses.
The aim of the consultation, according to a recent official update, is to provide new travel and subsistence rules which “reflect the working patterns of the 21st century.”
Derek Kelly, MD of Optionis (the parent company of Parasol and ClearSky Accounting) welcomed the review, and said that the consultation is “a golden opportunity to create an expenses system that works for all parties.”
Have unscrupulous umbrella schemes had their day?
Kelly has frequently voiced his concerns over the business practices carried out by some firms within the umbrella industry.
He said that while Parasol processes only legitimate expenses, “it’s no secret that some unethical umbrella companies encourage contractors to submit round-sum allowance claims in order to maximise their own profits.”
In some recent cases, non-IT workers have been forced to use umbrella schemes, and told to claim expenses which have not been legitimately incurred – purely to minimise the amount of tax and National Insurance their employers have to pay.
These workers are typically unaware of the tax implications of such practices, and despite their innocence, may find themselves subject to HMRC investigations.
Kelly hopes that the forthcoming consultation “will be the first step in the creation of a fairer and more sensible system.”
Employee benefits in kind and expenses
Alongside the travel / subsistence consultation, four related consultations into employee benefits in kind (BIK) and expenses will also be launched over the summer.
The main proposals include:
- The abolition of the current £8,500 threshold to simplify the system.
- The creation of a new exemption for ‘trivial’ BIKs
- Possible replacement of the current expenses dispensation system with a ‘general business expenses dispensation’. This would make expense claims more transparent, and consistent between businesses.
- A new voluntary system to process BIKs via the payroll, instead of submitting P11D forms… this is known as ‘payrolling’.