October 2009

Tax rules for temporary workers under scrutiny

Auker Rhodes accountants are warning employers that HM Revenue and Customs (HMRC) is set to investigate the alleged misuse of tax concessions for temporary workers.

The department has published a business brief on the way that tax, National Insurance (NI) and minimum wage rules are applied to temporary staff, following concerns that some are being used unfairly or illegally.

Ian Hales from Auker Rhodes said “There is particular concern over the scheme which allows temporary staff to claim tax relief on travel and subsistence, as it is suspected some employment agencies may be misusing the concessions”.

Examples included wrongly applied exemptions, expense claims incorrectly made tax free, illegal deductions from workers’ pay and breaches of the national minimum wage. HMRC believes that such schemes are often marketed to workers as representing a tax and NI saving for them, when the major beneficiary was in fact the recruitment agency.

HMRC has warned that it will investigate and challenge employment businesses and umbrella companies which do not fully comply with their statutory obligations.

The author is a Senior Manager in Auker Rhodes Chartered Accountants of Bradford, members of UK200Group with offices throughout the UK and Associates overseas.

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