Treasury looks to close employment tax loophole

Date: 12th August 2008

Reports suggest that the Treasury might be considering closing a tax loophole that affects some temporary workers.

According to the Financial Times, the government is considering altering the rules for concession for travel expenses after discovering what it termed "widespread abuse" of the £300 million tax break.

Introduced a decade ago, the concession was designed to ease costs faced by workers travelling to temporary employment. It worked by allowing them to claim back tax relief for travel and subsistence expenses.

However, the newspaper added that there is a growing concern that the rules are being exploited by people using an "overarching employment contract". It explained: "This contract with an intermediary means separate assignments are described as a single employment, so each workplace is deemed to be temporary, allowing them to claim tax relief."

The Treasury said that the situation could potentially lead to the exploitation of workers, as there was a "risk that the temporary labour market will be distorted by end clients encouraged to casualise their workforce", the paper reported.