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FCSA welcomes amendments to draft Finance Bill to stamp out unethical practice

FCSA has welcomed the extra measures included in last weeks 2016 Finance Bill which clarified long awaited details on restricting travel and subsistence tax relief for those contractors working through an intermediary.

The latest amendments will now prevent the organised misuse of personal service companies (PSCs) to avoid the restrictions; the original draft meant that PSCs would not be caught if they were outside of IR35, whereas other intermediaries would be caught unless they could prove the worker is not subject to supervision, direction or control (SDC).  Therefore, it would be possible for PSCs outside of IR35 to receive the tax relief even if they were subject to SDC and it is this potential abuse that has been addressed.

Julia Kermode, CEO of The Freelancer and Contractor Services Association (FCSA), the leading independent trade body that represents umbrella firms and accountancy providers said: “From the outset we have been concerned that the T&S reforms could encourage inappropriate use of personal service companies, knowingly or unwittingly, within the supply chain.  It may not always be the best mechanism for workers, potentially putting them into a more precarious position than previously.  For example they may not be aware of the full implications; the legal and financial responsibilities as a company director that cannot be delegated.  In addition, the individual will not be eligible for any statutory employment rights, such as minimum wage, holiday pay, which could be an unpleasant surprise if they have previously had these benefits.

“Taking these factors into account, it is not surprising that the draft legislation has been amended to prevent any potential abuse or misunderstanding and we welcome the changes.  However, it should be borne in mind that the vast majority of personal service companies are run compliantly by individuals who make an informed choice to operate in this way.”