Is Your Phone Listening To You: An Experiment
March 22nd, 2019
If you’re an IT contractor working through an umbrella company, you may not be aware of the turmoil within the industry following a Government consultation last year. The question asked was whether to continue to allow contractors to offset travel and subsistence expenses against their taxable income – the single benefit that makes working through an umbrella company so attractive and the removal of which, threatened to wipe the industry out in a stroke.
In the Autumn statement 2014, the Chancellor George Osborne stated that ‘the government will change the rules to restrict travel and subsistence relief for workers engaged through an employment intermediary, such as an umbrella company or a personal service company, and under the supervision, direction and control of the end-user. This will take effect from April 2016 following a consultation on the detail of the changes.’
In response, some predicted the end of umbrella companies within 12 months, with a large migration to contractors operating through their own limited company. Others speculated about how the government would define and police the ‘supervision, direction and control’ given the failure of IR35 legislation to collect any significant tax revenue. Optimistic voices noted the use of the word ‘restrict’ rather than ‘remove’.
But a lot hinged on the result of the 2015 General Election as the Conservative and Labour parties had quite different policies on umbrellas. It’s fair to say that as David Cameron walked back through the door of 10 Downing Street on May 8th, most umbrella company owners were breathing a sigh of relief. The Tories are more sympathetic to employers who request flexibility in their employment affairs, but as we know now, have large spending commitments to meet without raising taxes…which could very well lead to removing tax reliefs instead.
If we could crystal ball gaze for a moment, we suspect that there will be some action to clamp down on the unethical few who bring the umbrella industry into disrepute, but that the tax take from the majority of highly skilled, well paid contractors will prove to be too valuable to the Government to risk.
But there are no guarantees so make the decision on whether to use an umbrella company based on your own appetite for risk, what your long-term plans are and whether it will be tax-efficient based on the expenses you genuinely incur.