Temps 'make £300m of false tax claims'

Treasury looks to clamp down on expenses abuses

Written by Kevin Reed

Accountancy Age, 24 Jul 2008

At least £300m a year in false tax relief claims on expenses is made by the temping industry, the Treasury has claimed.

It is consulting on how to overcome the problem of temporary workers falsely claiming expenses tax relief while working in ‘umbrella company’ structures.

Temps have an overarching employment contract within an umbrella company. This then reaches an agreement with HM Revenue & Customs over what the employees can claim for travel expenses, but the taxman is concerned the system is being abused.

The Treasury believes there are as many as 100,000 temps working in these structures, plus another 225,000 with overarching contracts direct through agencies, estimating the cost of abuse is ‘at least £300m’.

Tax lecturer Anne Redston said the Treasury was wary about unsettling the temporary workforce. ‘We need a flexible labour market, the Treasury knows that is important, but there are a lot of cases where they overclaim expenses relief. One solution is to enforce current rules more rigorously.’

The consultation runs until 13 October.