Umbrella Company Expenses Ban, bad news for construction workers

Construction workers forced to operate via an umbrella company will see a reduction in their take home pay following yesterday’s Autumn Statement.

Contained within George Osborne’s 154 page document, is the decision to ban workers employed via umbrella companies from receiving tax relief of their expenses.

The document says: “As confirmed at Summer Budget 2015, the government will legislate to restrict tax relief for travel and subsistence expenses for workers engaged through an employment intermediary, such as an umbrella company or a personal service company. This change will take effect from 6 April 2016.”

From next year, those operating via an umbrella company will have to pay employer’s national insurance, employee’s national insurance and income tax on 45% of their total earnings. Under current rules, workers avoid paying tax and national insurance on part of their wage that contributes to travel and subsistence expenses.

For a worker claiming £50 of expenses a week they will see their pay fall by £22.50 a week or £1,170.00 a year. Brian Rye, Acting General Secretary of Union Of Construction Allied Trades & Technicians (UCATT), said: “This is a kick in the teeth for workers who are already losing thousands of pounds a year by being forced to work via an umbrella company.

“This is effectively a pay cut and means that construction workers will be unable to make ends meet or afford life’s extras which are often the only recompense for working long hours in a hard unforgiving environment.”

 

UCATT believes that workers are owed compensation for the traveling to temporary sites and having to work away from home, and that this should be paid on top of wages and not used to bulk out wages.

Since 2014, workers have been losing large amounts of money due to the government introducing new measures in 2014, which required workers to be payed via PAYE, after they are recruited by employment agencies. By forcing employers to be payed via an umbrella company, the agency, contractor nor the payroll company are liable for increased costs.

 

 

 

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