Concern about agency
workers' understanding of recent employment changes
THE Low Incomes Tax Reform Group (LITRG)
is urging workers to consider their relationship with umbrella companies
carefully, especially as a key advantage of using such companies has now been
New rules from 6 April 2016 prevent workers engaged through an employment
intermediary, such as agency workers working through an umbrella company, from
benefiting from Tax and National Insurance contribution (NIC) relief for home to
work travel expenses.
But umbrella companies continue to exist in part because many agencies are
unwilling to deal with taxes and day to day staffing issues, preferring to
delegate such matters to umbrella companies. To try and attract workers they may
be 'selling' the other, non travel expense related benefits they can
provide over agency PAYE. An example may be marketing 'employee' rather
than 'agency worker' employment rights and the ability to provide a
continuous payroll link from one assignment to the next.
LITRG is concerned about the potential for agency workers to be confused by all
the marketing claims, and it has produced a guide for the workers so they can
analyse some of the key Tax related points they may be hearing.
Anthony Thomas, Chairman of LITRG, said:- "If you are thinking of paying a
fee to an umbrella company, it is important to understand what you are getting
for your money; you should not just accept things you are told about still
being able to claim for expenses other than those related to home to work travel
for example, without trying to understand for yourself how worthwhile this
really is to you.
The general expenses rules, which apply equally to those under agency PAYE as to
those working for an umbrella company, are very tightly drawn, meaning there may
be few expenses for the umbrella company to process. In addition, even if you do have some
expenses that qualify for Tax Relief, the umbrella company should probably not
be giving you Tax Relief there and then as part of your weekly/monthly payroll. Instead you will need to claim
Tax Relief at the end of the year; assuming that your potentially fluctuating
earnings over the course of the year mean you pay enough Tax to do so; which is
actually just the standard position for workers across the board.
It may be that your circumstances mean that you are still attracted to umbrella
PAYE over agency PAYE and this is fine. Our message is simply to weigh up all
the issues before making that decision and hopefully our guidance will help you