Treasury to clamp down on travel tax break

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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