Following a media story that appeared in the Guardian on Friday April 15th (recruiter advises construction firms how to overcome tax loophole clampdown) suggesting that Recruitment firm 1st Step Solutions has been advising firms about how to classify temporary staff as “unsupervised” to avoid a tax loophole around travel and subsistence tax relief claims, FCSA would like to point out that umbrella firms are not exploiting tax relief on a large scale. FCSA research shows that, on average, 40% of umbrella employees receive the relief which confirms that this is not the case. Moreover, it is simply that this group of workers has received the relief when it is genuinely necessary to be recompensed for travelling significant distances – usually more than 180 miles per week, compared to a “normal” commute which is 84 miles per week – to carry out an assignment.
FCSA also challenges Unites’ Bernard McCaulay’s comment that ‘workers would be stripped of holiday pay and their automatic enrolment pensions contributions, while allowing employers to pay no national insurance and circumvent nationally agreed rates of pay’ as this is completely untrue if there is an umbrella in the supply chain. FCSA reiterates that umbrella employment provides temporary workers with all statutory benefits of permanent employment whilst enabling the worker to fulfil a series of contractor positions and have their affairs managed centrally.
The media report also implies that construction firms simply need to state that their workers are not subject to supervision, direction or control in order for their temporary workers to receive relief on their expenses. However, the legislation and guidance from HMRC clearly states that simply declaring this to be the case is not evidence enough.
Julia Kermode, CEO of FCSA said: “Signed waivers and generic statements will not be considered to be satisfactory evidence that an individual is not subject to supervision, direction or control. HMRC will test by examining relevant documents and gathering facts from all parties involved, and if HMRC considers that evidence is unsatisfactory they will recover PAYE and NICs due from the employment intermediary that paid the worker. The liability for deciding if there is no supervision, direction or control rests with the firm that pays the worker, which may not be the recruitment firm if there is an umbrella in the supply chain. FCSA members that are umbrella firms are all aware of their responsibilities and how to operate compliantly, and therefore would not accept a generic statement or “tick box” as satisfactory evidence.”