From April 2016 temporary and contractor workers who operate through umbrella companies may be restricted on their ability to claim travel and subsistence expenses at the time they are incurred.
At the moment they can claim this on a weekly or monthly basis which means that they don’t have to wait until the end of the year to claim. The proposed changes will mean that these workers can still claim these expenses but will have to claim at the end of the tax year via a self assessment tax return.
What is the cost of this to the temporary or contract worker?
The FCSA estimates that somewhere in the region of 400,000 umbrella company workers will be worse off financially as a result of these changes.
It is estimated to cost umbrella company workers between £60 and £120 per week on average, this is equivalent to £3,120 each year. They will be able to claim this back but they will have to wait until the end of the year.
For some of these workers who are on lower pay, living hand to mouth, it will not be an option to wait until the end of the year and with potential increased costs of hiring an accountant, they would be better off reverting to PAYE via their agency.
As a user of temporary and contractor workers, why does it matter to me?
If you use temporary and contract workers who operate through umbrella companies you may have to pay more to keep them.
With the labour market being as buoyant as it is, particularly in the construction sector where this legislation may have its biggest impact and where a large proportion of temporary labour has been recently impacted by the false self-employment legislation, it is unlikely that workers will be willing to stomach a reduction in take home pay. Therefore, it is anticipated that these costs will be passed on by the agencies in increased charges to their clients’; initial estimates indicate an increase in costs of up to 20%.
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