Temp sector under attack on all sides
The 2015 budget announced that the government intended to forge ahead with plans to change the rules relating to travelling expenses for contractors.
This followed an earlier consultation which was targeting umbrella companies and the questionable claims they make for travelling expenses.
Umbrellas companies use a controversial method of ‘employing’ agency workers on ‘overarching’ contracts which implies the worker enjoys the benefits of a permanent job (which they generally don’t). This allows the workers to claim subsistence and travel expenses for thier journey to and from work, even though the normal rules prevent agency workers from doing this.
The government’s inevitable response is to simply say that anyone who is working via a third party and is under the effective supervision or control of another cannot claim travel expenses from April 2016. However, the budget announcement reaches much further as it also includes temporary agency workers using their own limited companies.
This is bad news for limited company contractors as the new reporting requirements on agencies paying anyone in any way other than PAYE have just taken effect. The combination of this new source of information and the new rules on travel expenses are going to leave some limited company agency workers questioning the viability of the limited route.
The short lived explosion in ‘self employment’ where normally agency workers were deemed to be self employed purely on a theoretical right to be able to send another worker in their place has already been dealt with by legislation and is this that has lead to the new reporting requirements referred to above.
All of this, together with the imposition of workplace pensions and the dramatic cuts to margins following the arrival of supply chain management in the last few years is making both being and supplying a temporary agency worker, harder than ever.
The recruitment industry has to take a lot of responsibility for this turn of events. By condoning and encouraging the explosion of more and more outlandish ways of avoiding income tax the recruitment industry has forced the authorities to stop turning blind eye. It was one thing for an individual to quietly manage his/her affairs to minimise income tax. Quite another, to run garish advertisements and hard selling schemes to ‘pay less tax’.
Many of these schemes were blatantly about avoiding (and thus pocketing) the employers national insurance element of workers pay. It is to the shame of many recruitment agencies that they advocated these schemes.
It seems the recruitment profession suffers form a split personality in that on one hand it endlessly agonises on how it can enhance its professional reputation. Not a week goes by about another news article about 'how to win the respect' of one’s client. But on the other hand, the recruitment industry has a blind and enduring obsession with getting one over on the tax man. This has lead to it getting it hands very dirty in tax avoidance schemes, the response to which will leave us all with the most unfavourable climate for temporary agency work there has ever been.