Expenses - a new level playing field?

Posted on 30 July 2008

As REM once said, it’s the end of the world, as we know it, or is it? Our friends in HMRC released a new consultation paper last week that explores the concept of Over Arching Employment Contracts and Expenses. Or put another way, “Expense abuse by Umbrella Companies and Agencies”.

Parasol and others are being asked to consult in relation to some of the issues around how expenses are paid. Key to this is the HMRC view that an over arching employment contract is not a guarantee of true employment and that “fairness” between workers is not being applied. There could be some union/EU pressure there but the gist is that an IT guy claiming expenses doing the same job as the “perm” has an unfair advantage over the permie. Don’t shoot the messenger! We all know that there are significant differences but HMRC take a “bigger picture” view it would seem.

If you are using or have used Parasol you will also know that we are stringent with our expense policy (and we have lost Contractors because we won’t bend the rules) but others are not. Some Agencies also allow an element of expense claiming via a PAYE solution and these factors combined have it seems, driven HMRC to take a look. Clearly there is also a tax take point here, and with deficits, some money will have to be found.

The paper presents a couple of options plus requests for other ideas. The first option (in general) looks at how HMRC can be stronger with policing expense dispensation issues, perhaps even going as far as reducing the amount of time expenses can be claimed for and on what basis – that’s the good news! The other option is for HMRC to try to remove travel and subsistence expenses for “temporary workers” completely! The latter also affects those some Agencies that use an amount of expenses with a PAYE scheme.

So, are we panicking at Parasol House? No – I have long said that expenses should be better policed and that a level playing was better for all. Over claiming of expenses that are not actually incurred has never been good practice, seems HMRC have finally had enough. We of course believe that a properly compliant expense policy is what is needed, we can also demonstrate that we are more like an EDS or Logica than a simple trading entity. Will EDS be told to stop allowing expenses for their consultants?

So my message is that we will be keeping you updated and would want to hear your views too, Remember we are talking to HMRC about this and your support in explaining just how different you consider yourself against your permie colleagues could be vital. You will also hear and read about the end of the world for Umbrellas and as such; rest assured Parasol is very different to most. So I welcome an attempt to create a level playing field and we have an excellent track record of being ahead of the game in these matters.

Have a great August.

Rob

Category: Business Expenses

Comments

Displaying comments 1 to 14 out of 14

Stuart Robinson says:

It seems to me that HMRC is unfairly biasing against contractors. I used to work for Cap Gemini and our home was our base, therefore all travel could be reclaimed. If HMRC want to equalise with permanent staff then this should benefit the contractor too, in such areas as: sick pay, full holiday entitlement, employer NI contributions, employer pension contributions, etc. Permanent staff also in my experience also get huge discounts on company product up to 75%. Some companies also have share schemes.

Posted on Tuesday, 05-08-08 14:08 by Stuart Robinson

Chris Rimmer says:

The main difference to me is that I am working on a contract of limited duration - 6 months in my case. Once that period has elapsed, I am still employed by Parasol, but I do not receive anything like the same level of pay as a permanent consultant who is "on the bench".

When I was a permanent consultant for a database company, I worked for over a year continuously for each of two separate clients, and there was no question of not being paid expenses for travel to, and subsistence at, client sites.

A permanent IT employee typically works at a single location or is paid expenses to travel to other sites. If the employer expects them to change their usual place of work, there is typically a relocation package available to compensate for the expense of moving or extra travelling.

Posted on Sunday, 10-08-08 21:18 by Chris Rimmer

Anon says:

I see myself differently as I do not receive training (which is very costly), sick pay, pension. When I contract I cannot use the company I am contracted to's gym for free, take advantage of employee discounts which are secured for permie employees only and cannot get a space on the company car park like the permies forcing me to pay excessive parking charges. If the market it quiet I could be out of work for a few months, and as Chris mentioned we do not get paid and we cannot claim for anything.

I appreciate the HMRC need to get a handle on the claiming of unjust expenses but I feel that they are targeting the wrong people.

Posted on Friday, 15-08-08 19:54 by Anon

Mark Hutton says:

Level Playing Field?

So when are MPs going to be taxed on their expenses?

Posted on Wednesday, 20-08-08 10:28 by Mark Hutton

John Ciriani says:

My current contract requires me to regularly travel between 4 company owned sites as well as occasional supplier visits.If the rules change so as to eliminate my being able to claim expenses I would have to cease the contract. It would not be viable to continue.

Posted on Wednesday, 20-08-08 16:37 by John Ciriani

Trevor Turner says:

I am aware that some umbrella organisations are very lax with control and monitoring expenses.
However my main point here being that my current contract is with an organisation that pays it permies travel expenses from home to office, and that even some direct employed contractors are also paid travel costs from home to office which do not appear on timesheets or payslips. So no wonder use reasonable honest contractors are in the front line again.

Posted on Thursday, 21-08-08 10:49 by Trevor Turner

Stuart Fielding says:

Seems to me that some bad apples have created this situation (Brollies and Contractors). Clamp down on the ones that abuse but don't stop us genuine Contractors from earning a living.

Posted on Friday, 22-08-08 15:00 by Stuart Fielding

Richard Nelson says:

‘Level playing field’ is a joke. These amendments are just another part of the government’s ongoing persecution of freelancers; to cheat them out of their legitimate business expenses.

I am Cheshire based and pay £2000/month flat rental in London. I only work 5 days/week, so I can only claim 5/7ths of the cost of the flat (£1428) and have a £572 unclaimable business expense every month under PAYE rules. Last month I had 3 weeks off sick so I had to stand the full £1500 cost of the flat with no reclaimable expenses because I wasn’t working.

If I worked for EDS or Accenture the full cost of flats would be offset against their operating costs, not the employee.

There’s a lot more but I won’t go on.

Don’t tell me freelancers are misusing expenses… the revenue don’t play fair because the government like it that way and encourage their mischief!

Posted on Tuesday, 26-08-08 16:56 by Richard Nelson

S Roberts says:

This is a legitimate move to offset those abusing the system but, as with all unilateral changes, they will get it wrong in the application. The outcome to _that_ is that, if contracting is made unviable/non-cost effective then no one will opt to do it. The impact on business will be disastrous as it is far cheaper/more practical for firms to resource as necessary than have direct employees. What will HMRC tell employers when the resource is gone, hm? Nothing happens in a vacuum.

Posted on Thursday, 04-09-08 10:01 by S Roberts

Steve Owens says:

I live in Manchester, but have to now contract in London, 2 reasons 1 - no work left in the north west for Server Engineer Contract and 2 - the rates are so low its now less than perm, only work around is in London and the rates have come down loads there as well. Without the reclaiming of Expenses I would not be able to work as the cost of living and bills are now far too high in this country... The price of petrol has doubled it feels, but HMRC don't allow us to claim any more money on Mileage ....????

Posted on Monday, 08-09-08 13:09 by Steve Owens

Gbenga says:

I have always been truthful with y expenses but and also know permies I work with who claim expenses when they travel to other sites.

Posted on Tuesday, 09-09-08 19:46 by Gbenga

Mark Fox says:

Contractors get more travel expenses than permies bacause we have to travel more. I am now doing a 100-mile round trip commute, wheras if it were a permanent position I would just move house to be closer to work (obviously not practical on a 3-month contract).

Posted on Wednesday, 10-09-08 20:45 by Mark Fox

anon says:

As a former perm employee of Logica I know all to well about there expenses. Over £300 a month of expenses just for myself, anything and everything went through. Being as contractor I have so many less benefits, why the HMRC deem it OK to go after the contractors again is beyond me

Posted on Wednesday, 24-09-08 13:11 by anon

Rob Crossland says:

See my latest blog post.

Thanks for all your comments.
Rob

Posted on Monday, 01-12-08 15:12 by Rob Crossland