Relief for travel expenses: temporary workers and overarching employment contracts
In July 2008, HMRC published a consultation document relating to the use
of 'overarching' contracts of employment for workers engaged by employment
agencies and umbrella companies. In the consultation document HMRC expressed
concern that the workers, by virtue of being employees, were obtaining the
benefit of tax relief on their home to work travel costs to which employees
are not normally entitled. This tax relief is available because in most
cases agency or umbrella workers are working at a succession of temporary
workplaces, rather than at a permanent workplace.
Following the consultation, the Government has decided to retain the current
rules, although the consultation confirmed that there were poor levels of
compliance which could be improved if HMRC were able to enforce these more
strictly. HMRC will refocus their efforts to make sure that the regime is
properly applied. However, if compliance does not improve, then the
Government may return to this issue.
Our view
This announcement is very welcome as it makes clear that the current
regime will continue, at least for the time being. This benefits not only
temporary workers, but changes to the rules may have had an adverse impact on
other employees with a succession of temporary workplaces, e.g. in the
construction industry.
