Over the last few years, the prevailing winds have been distinctly chilly for tax avoiders, and this Autumn Statement will be no exception. Following a consultation, Chancellor Osborne is set to announce a big tax increase affecting some 400,000 workers.
These workers are currently engaged by umbrella companies or personal service companies and the change is expected to add around £8 per week (or £400 per year) to their tax bills.
It is generally understood that the expense of travel from home to work does not qualify for relief from tax and neither does the cost of the lunchtime sandwich. Yet certain employees of umbrella companies or individuals who work for their own personal service company have been able to get around this rule by claiming to work from home or by having a special employment contract called an ‘overarching contract’.
In his Autumn Statement, the Chancellor is expected to announce a change in the legislation which will do away with this anomaly. This is expected to raise about £160m in extra revenue, meaning an average rise of £8 per week for affected workers.
While it is correct that the Chancellor should put a stop to anomalies in the tax system created by little tweaks in contracts, it should not be overlooked that in the main it is low paid workers - warehouse packers, temporary manual workers and the like - who will be hardest hit by this change. Presumably, the Chancellor will hope that companies engaging such workers will do the right thing and shoulder much of the increased tax burden. But with other onerous demands being placed on employers, whether they play ball is another question entirely.