HMRC seek consultation on salary sacrifice arrangements on reimbursed business expenses

HMRC seek consultation on salary sacrifice arrangements on reimbursed business expenses

Wed 03 Dec 2014

The Government is proposing to stop tax relief advantages being claimed by workers engaged by ‘Umbrella’ companies on reimbursed business expenses that are not generally available to other workers. This will affect those workers who provide their services via employment intermediaries (umbrella companies) and who have put in place ‘salary sacrifice’ arrangements in order reduce their exposure to Income Tax and National Insurance Contributions (NIC).

In response to recommendations from the Office of Tax Simplification and as part of its reform of the rules for employee benefits and expenses, the government will undertake a consultation process inviting comments and representations from interested parties.

The purpose of this consultation is to consider the removal of the tax and NIC advantages that workers who provide their services via employment intermediaries – umbrella companies – have over other workers.

A number of these umbrella companies have put salary sacrifice arrangements in place in order to claim relief on the cost of travel between home and the place of work. This gives rise to a tax relief that is not generally available to other workers.

Mazars welcomes the announcement of this consultation document which seeks to remove a loophole currently used by umbrella companies and other employment intermediaries to gain tax advantages that are not available to other employees. This will result in a more level playing field and in many respects may reduce the attraction for a worker to provide their services via an intermediary like an umbrella company.

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