Dave Chaplin, CEO, ContractorCalculator:
Unless you’ve been locked in a dark room since July this year, you will be aware that HMRC wants to stop contractors from claiming travel expenses.
Whilst they admit to having no hard facts about this, they claim that there is widespread abuse of the tax system by contractors using umbrella companies, and that they are claiming travel and subsistence expenses that they should not be entitled to, or haven’t even incurred.
Firstly, they are entitled to claim expenses, just as anyone running business can too. Contractors who work via umbrella companies are flexible workers who run their own businesses. They aren’t temps, they are contractors. There is a difference.
Contractors using umbrellas don’t bother using limited companies because either they are caught by IR35, or they don’t earn enough to be able to make the limited company a tax efficient choice.
As for the so called ‘widespread’ abuse, this is an unsubstantiated charge. The vast majority of the umbrella companies are running legitimate business and certainly not allowing or encouraging their contractors to cheat the tax system. Many are willing and happy to work with HMRC to be independently audited to prove this isn’t happening.
If HMRC bring in legislation to stop umbrella workers claiming travel, they’ll all just create limited companies, and this will cost HMRC a great deal of more money to administer.
Gun. Own foot. Fire!