FCSA pursue amendments to legislation
FCSA is urging MPs to show their support for contractors by remedying the errors made in the Finance Act. In a late change to draft wording earlier this year, the legislation was amended, without consultation, to specifically encompass contractors working through an umbrella firm.
As a result, from April 2016, these contractors will no longer be able to claim their properly incurred tax relief on travel & subsistence expenses at source and instead they will have to wait many months in order to claim via a self-assessment tax return.
FCSA’s CEO Julia Kermode said:
There does not appear to be any rationale or justification for delaying the receipt of umbrella employees’ tax relief entitlement. It is unforgiveable to knowingly introduce legislation that will reduce income for a specific element of the workforce; this is not affordable for anyone’s personal circumstances, particularly not in the current climate.
Due to the pre-election build up, there were only two days from the publication of the legislation to it becoming enacted, so there was no opportunity for affected parties to influence the legislative process at that stage.
As CEO for the sector’s trade association, I cannot risk reputational damage to umbrellas next year when their employees receive less income from April 2016, despite undertaking the same work. Campaigning for a change in legislation is a bold and ambitious move, and this second budget gives us an opportunity that we simply must grab.
First Freelance is an accredited FCSA member firm and we are fully committed to working alongside and supporting the FCSA in their campaign to protect contractors.
Economic recovery so far has been widely attributed to the UK’s flexible workforce that enables businesses to be agile in responding to peaks in demand without the liability of permanently increased headcounts. However, HMRC seeks to end tax deductible travel and subsistence expenses for people travelling to a temporary workplace.
By definition, contractors fulfil a temporary need at several different locations, without the stability of permanent employment, and therefore do not have a normal home to work commute. They often spend considerable time and money on travelling to fulfil the temporary need, and therefore it is appropriate for their expenses to be tax deductible.
The removal of this relief will effectively reduce their income, leaving them no choice but to increase their rates or to only accept work near their home, thus limiting their opportunities. These decisions will ultimately damage economic recovery by endangering the flexible workforce.
In summary, this legislation will have the following impact on flexible workers:
- They will be financially worse off travelling to offer their skills on various assignments
- To offset these losses, they may be forced to increase their rates, which in turn drives up costs and impacts on recruitment firms and end users
- If they are forced to increase their rates, they may not be offered or able to obtain work, therefore risk losing even more money
- It may no longer be viable or affordable for them to travel, limiting their job opportunities and reducing the pool of contractors available to businesses
Currently, a large proportion of the workforce (15%) choose to undertake short term contracts, and these HMRC proposals may drive individuals to seek permanent employment. However, such permanent roles are unlikely to be available, and the UK economy needs people who are prepared to fulfil the need for short term assignments and projects.
First Freelance’s Managing Director Mark Beal-Preston said:
This legislation in its current state will certainly have drastic implications on the UK’s flexible workforce and the wider UK economy. The Government needs to be far more in touch with current and future working patterns, and the invaluable role flexible workers play. Rather than seeking to penalise contractors, Government should be working to provide them with the support and recognition they richly deserve.
Published on: 23 July 2015 - By: First Freelance