‘Stealth tax’ will cost contractors £16.6bn, shows research

Contractors in the UK will suffer under new plans to scrap tax relief on travel and subsistence expenses, claims a national accountancy firm.

Research by Danbro shows that more than one and a half million workers could be affected, leading to negative effects for the continued growth of the UK economy.

Stealth tax

From April next year, contractors could face an extra £16.6bn a year in lost expenses. The changes could also mean British industry has to find an extra £7bn if it is forced to make up the shortfall in pay.

Damian Broughton, managing director of Danbro, explained: “The Chancellor started by saying this was a budget that would deliver what businesses need – competitive taxes. The reality is that he’s raided the pockets of contractors and businesses alike with a cynical stealth tax."

“This move could have a potentially devastating effect on some businesses that rely on freelance workers to provide the skills they need. If they want contractors to come to their site they will have to pay much more – many won’t have the capacity to do that," Broughton added.

Employment intermediary

Research by Danbro suggests that under the new system, the average freelance worker could lose £200 a week. It also found only a quarter would consider taking on a contract without tax relief on expenses after the changes come into effect.

The new rules are aimed at weeding out tax payers who claim travel and subsistence expenses relief unfairly. However, the net gain for the Treasury is likely to be in the region of £265m.