The FT has reported that:
The "widespread abuse" of a £300m ($575m) tax break for some temporary workers is under attack by the Treasury, which is considering reversing a concession for travel expenses it introduced 10 years ago.
In a consultation paper, the Treasury said its losses were set to "significantly increase" if it did not clamp down on the tax dodges used by some employment agencies and "umbrella" intermediary companies employing about 100,000 workers, ranging from IT contractors to fruit pickers. But the Treasury said the employees did not always benefit because the employer sometimes adjusted pay rates to take account of the lower tax bill.
They added:
The Treasury said it was concerned about the exploitation of workers. There was "also a risk that the temporary labour market will be distorted by end clients encouraged to casualise their workforce on the basis that workers will continue to have employment rights and receive tax-free travel expenses to which they were not entitled as permanent employees".
But umbrella companies might have benefits for the economy by providing flexibility for workers and businesses. It wished "to weigh up whether or not there are advantages for business and the flexible labour market that outweigh the unfairness and, if not, how to tackle the unfairness".
It seems unlikely they'll favour the companies when as the Revenue notes:
When Revenue & Customs tried to claw back the tax owed, umbrella companies often ceased to operate and moved their workers to a new company.
The unacceptable face of capitalism, for sure.
And you can also be sure that some accountants know all about it.
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Richard,
Is any of this actually illegal?
Georges
Do you imagine making inflated and therefore false claims is legal?
Do you think accumulating a liability and then abandoning your company legal?
And anyway, since when did something have to be illegal to be abusive? Aren’t things made illegal because they are abusive?
Richard
Richard,
Terms like “abusive” and “avoidance” (in the context of taxation) are synonymous with “opinion” and therefore just that. If it is legal, it is legal. If an individual acting legally means that government takes a financial “loss” (this of course assumes that government has the preeminent claim on the old pay packet) I break out my hard cheese to share.
As this “issue” seems to be the result of government “doing something” back in 1998, it would be interesting to go back and see the political reasons for the original passage of the regulation. No doubt it was designed as some sort of do-gooderism.
That law of unintended consequences, works every time.