HMRC attacked this sector hard last year with the changes to the taxation of Intermediaries arising from offshore arrangements and false self-employment. The impact will only really start to be felt in practice when the reporting requirements come into force from 6 April 2015.
There is still unfinished business here though. Any action following the Office of Tax Simplification review of the travel and subsistence relief will directly affect Umbrella companies in this sector. This is currently at the stage of open consultation with no decision due on whether HMRC will seek to proceed with any actual reform until Spring 2015. In addition Ed Miliband stated at the Labour Party conference in September, that if Labour come to power it would introduce further tax avoidance measures “preventing so called umbrella companies being used by firms to avoid tax and national insurance by exploiting expenses rules”.
Personal service companies (PSC) were largely left untouched by the Intermediary rules save for a TAAR designed to stop agencies encouraging workers into PSC solutions. However, the industry is seeing more PSC use driven by the Intermediary rule changes. This is all on top of HMRC still grappling generally to make the IR35 rules work in practice. It recently announced that it was going to scrap the business entity tests after the IR35 forum reported back that they were not being used in practice. We fully expect there to be an overhaul of the rules at some point, but we don’t see that coming any time soon.
The consultation on scrapping the expenses dispensation in favour of a general expense allowance has now closed and we expect the response to be published at the time of the Autumn Statement. We would fully expect dispensations to be scrapped from next year. The devil will be in the detail of the proposals but this should be welcome outcome for this industry.
So our prediction is that there will be no bad news for the temporary work sector this autumn but the same might not be able to be said in the coming years.