HMRC publishes ‘pay day by pay day’ tax relief statement
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.
Providing an initial response to today’s HMRC statement, Tom Hadley, the REC’s Director of Policy and Professional Services says:
“Our ongoing discussions with HMRC have underlined the need to ensure that there is consistency and clarity in the way that tax regulations are applied. The underlying priority is to promote a level playing field for recruiters. We will be reviewing the HMRC statement in more detail and seeking more information about proposed enforcement activities. Agencies who are in any doubt about the current model they are using, are recommended to seek advice from a professional adviser or HMRC."
