HMRC comment on Travel & Subsistance Schemes

HM Revenue & Customs (HMRC) have published a statement on ‘Pay day by pay day’ tax relief models. The announcement can now be accessed on the HMRC web-site at the following link:

The statement relates to a business model which applies tax, and in some case National Insurance contributions, ‘relief’ on a pay day by pay day basis. Temporary workers who incur travelling and subsistence expenses which are eligible for a tax deduction are paid a gross pay.

However, rather than subjecting this gross pay to Income Tax and National Insurance, the employer applies tax and National Insurance Contributions ‘relief’ to the amount of expenses which the employee has incurred with the effect that only the balance is subjected to Income Tax and National Insurance. This tax and National Insurance contributions ‘relief’ is applied each pay day.

The statement issued by HMRC thus indicates that the current HMRC view is that this model does not comply with the Taxes Acts or Social Security Acts and associated Regulations. HMRC is seeking to identify those businesses currently operating pay day by pay day relief models and organisations are being urged to consider whether they are compliant with tax and National Insurance legislation.

Essential Recruitment does not run such schemes and have been lobbying for some time to ensure our industry operates on a ‘level playing field’. We will watch closely on what further action HMRC do in respect to these unethical models.