Construction workers face losing thousands in tax change

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Hidden in the details of the chancellors autumn statement is a serious blow for construction workers using umbrella companies with a sharp reduction in take home pay.As stated in the 154 page document is the decision to ban workers employed via umbrella companies from receiving tax relief on 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.”

This means that from next year workers operating via an umbrella company will have to pay employer’s national insurance, employee’s national insurance and income tax on all of their earnings (45% of their earnings) . Under the current rules expenses for travel and subsistence form part of a worker’s pay and therefore they avoid paying tax and national insurance contributions on this element of their income. 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 UCATT, commented saying: “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.”

UCATT believe that expenses form a legitimate part of construction workers’ take home pay as they recompense them for having to travel to temporary sites and often have to work away from home. UCATT believes that legitimate expenses should be paid on top of wages and not used to bulk out wages.

Workers are already losing large amounts of money by being forced to operate via umbrella companies after they are recruited by employment agencies. The Government’s policies do nothing to change that relationship.

Mr Rye added: “The Chancellor has protected his friends in the construction industry by allowing umbrella companies to remain legal while boosting his own coffers at the expense of ordinary construction workers.
“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.”