The unacceptable face of tax abuse

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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.