HM Treasury is looking at reversing the concession for travel expenses in an effort to close tax loopholes for employment agencies and ‘umbrella’ intermediaries after discovering ‘widespread abuse’ of £300m in tax breaks for some temporary workers.

A Treasury consultation paper, reveals its losses would ‘significantly increase’ if it did not clamp down on the tax evaders used by some employment agencies, employing about 100,000 workers, ranging from IT contractors to fruit pickers, the Financial Times reports.

But Treasury said the employees did not always benefit because the employer sometimes adjusted pay rates to take account of the lower tax bill.

The Treasury said intermediaries often encouraged workers to claim expenses which were not genuinely incurred. Expenses claimed ranged from £5,000 up to £ 20,000. When HMRC tried to collect the tax owed, umbrella companies often stopped operating and moved their workers to a new company.

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