Contracting Matters

As REM once said, it’s the end of the world, as we know it, or is it? Our friends in HMRC released a new consultation paper last week that explores the concept of Over Arching Employment Contracts and Expenses. Or put another way, “Expense abuse by Umbrella Companies and Agencies”.

Parasol and others are being asked to consult in relation to some of the issues around how expenses are paid. Key to this is the HMRC view that an over arching employment contract is not a guarantee of true employment and that “fairness” between workers is not being applied. There could be some union/EU pressure there but the gist is that an IT guy claiming expenses doing the same job as the “perm” has an unfair advantage over the permie. Don’t shoot the messenger! We all know that there are significant differences but HMRC take a “bigger picture” view it would seem.

If you are using or have used Parasol you will also know that we are stringent with our expense policy (and we have lost Contractors because we won’t bend the rules) but others are not. Some Agencies also allow an element of expense claiming via a PAYE solution and these factors combined have it seems, driven HMRC to take a look. Clearly there is also a tax take point here, and with deficits, some money will have to be found.

The paper presents a couple of options plus requests for other ideas. The first option (in general) looks at how HMRC can be stronger with policing expense dispensation issues, perhaps even going as far as reducing the amount of time expenses can be claimed for and on what basis – that’s the good news! The other option is for HMRC to try to remove travel and subsistence expenses for “temporary workers” completely! The latter also affects those some Agencies that use an amount of expenses with a PAYE scheme.

So, are we panicking at Parasol House?  No – I have long said that expenses should be better policed and that a level playing was better for all. Over claiming of expenses that are not actually incurred has never been good practice, seems HMRC have finally had enough. We of course believe that a properly compliant expense policy is what is needed, we can also demonstrate that we are more like an EDS or Logica than a simple trading entity. Will EDS be told to stop allowing expenses for their consultants?

So my message is that we will be keeping you updated and would want to hear your views too, Remember we are talking to HMRC about this and your support in explaining just how different you consider yourself against your permie colleagues could be vital. You will also hear and read about the end of the world for Umbrellas and as such; rest assured Parasol is very different to most. So I welcome an attempt to create a level playing field and we have an excellent track record of being ahead of the game in these matters.

Have a great August.

Rob