Tax changes could cost construction workers over £3000

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A recent document released by UCATT highlights the impact of the tax changes made to umbrella companies by Mr Osborne in the recent budget with construction workers travel expenses at an average of £144 a week now being taxable at 45% this will mean a loss of £64.80 or £3,369 per year.

Construction union UCATT has seen an HMRC Policy Document which shows a gross underestimation of the real impact of George Osborne’s tax changes for employees of umbrella companies.

The document, released quietly just before Christmas, states – that the tax change whereby construction workers working for umbrella companies will now be taxed on their travel expenses – “is not expected to have any significant economic impact.” And yet HMRC’s own estimates show workers will – at the very least – be £360 a year worse off.

UCATT knows this to be a gross underestimation of the financial impact on British workers. For the majority of UCATT members the loss will be significantly greater. From a recent case study, an average construction worker, working for an umbrella company will have £144 of weekly travel expenses. Under the new law, these expenses will then be taxed at 45 per cent (20 per cent income tax, plus both employees and employers NIC). This will mean a loss of £64.80 per week and a whopping £3,369 per year.

The document estimates that almost half a million (430,000) workers employed by umbrella companies or engaged by “employment intermediaries” will pay a lot more tax – tax on legitimate travel expenses – expenses, which for most British workers, are tax exempt.

Brian Rye, National Secretary of UCATT, said: “The attitude of HMRC in belittling the impact this tax change will have on construction workers, working under the yolk of umbrella companies, illustrates the utter contempt this Tory Government has for the British worker. £360 may be a dinner out for George Osborne but to the average construction worker that’s a major financial hit. In the real world, £3,369 less a year – will mean a lot less food on the table.”

Mr Rye added: “Almost half a million workers will be significantly worse off after April, when this measure is introduced. For those that have to travel to several sites for their work the hit will be massive. Meanwhile umbrella companies will be allowed to continue their tax dodging ways by this Tory Government. This Government is government by the rich, for the rich – and wants the rest of us pay. We’re damn sure George Osborne’s travel expenses aren’t taxed.”

UCATT are campaigning for the complete abolition of umbrella companies.

UCATT believes that normally expenses should be paid on top of wages and not be used to form part of expenses. However in the case of workers forced to operate via umbrella companies, being able to offset expenses against tax partially reduced the worker’s loss due to being forced to pay both the employer’s and employees’ national insurance contributions and the charge of up to £30 a week from the umbrella company.

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