In the Autumn Statement George Osborne promised to “Stop employment intermediaries abusing the tax system,” by “clamping down on agencies and umbrella companies who have abused tax reliefs for expenses”. Umbrella companies and contractors have since been through a period of concern about how the taxable benefit’s of travel and subsistence expenses may be affected.

Mr Osborne’s budget speech continued his promise to restrict any abuse of the tax relief system but it did remove the contracting industries concern of the abolishment of the current umbrella contractor system and introduced thoughts of review and reform instead.

… “Autumn Statement 2014 announced that the government would review the growing use of overarching contracts of employment that allow some temporary workers and their employers to benefit from tax relief for home-to-work travel expenses, relief not generally available to other workers.

“This is unfair. As a result of the review, the government will change the rules to restrict travel and subsistence relief for workers engaged through an employment intermediary, such as an umbrella company or a personal service company, and under the supervision, direction and control of the end-user.”

There will be measures to protect those who are genuinely in self-employment. The emphasis will be where there is a concern that contractors are actually seen more like employees – as in where they are under their client’s supervision, direction and control. Greater transparency on how workers are employed will be reviewed.

Mr Osborne’s Autumn Statement fuelled concern that contractor benefits may be abolished but now the industry seems more optimistic with talks leaning toward reform and change rather than abolishment. The Department of Business, Innovation and Skills will consult on these proposals later this year and it is this consultation that the industry now awaits with bated breath. The details, which are currently uncertain, will hold the key to the future benefits of umbrella companies and the payroll options contractors will have from next year. 

New measures and reform will take effect from April 2016.