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Archive for January, 2015


22/01/2015 | Philip Alfandary
In the Autumn Statement, the chancellor promised to crack down on an abuse of the rules for travel and subsistence expenses. The abuse is prevalent in the temporary labour market, but the changes wil

In the Autumn Statement, the chancellor promised to crack down on an abuse of the rules for travel and subsistence expenses. The abuse is prevalent in the temporary labour market, but the changes will affect a wider range of service providers. Last month, HMRC published a consultation paper on this topic. Mixed views have been expressed by those most affected, namely consultants and those who engage them. We review this and the series of measures (some recent, others less so) designed to bring those engaged in providing their own services into the PAYE fold, or at least to restrict the advantages of falling outside of PAYE.

“No one wants to be within PAYE these days” declaimed one of my clients last month. And he was right. PAYE of course applies where remuneration is paid to an employee. For employers, falling within PAYE entails the compliance headaches and related professional expense of applying it, together with the colossal cost of Employers National Insurance Contributions (NIC), which is a direct tax on employers, now running at 13.8%. Added to that, there is package of rights (such as pensions, sick pay and holiday pay) which an employment relationship entails, and which create corresponding obligations and risks for an employer. From the service provider’s perspective, being paid through PAYE means deduction for (almost all) business expenses are denied, and a higher NIC bill.

Hence there have been many attempts to bring service engagements outside of PAYE, and corresponding Revenue measures to counteract this. Years ago, the Construction Industry Scheme (known as the ‘lump’ within the industry) was enacted. This compels those subcontracting building work to withhold tax from payments made to subcontractors (much like PAYE does for employers), with the rate of deduction depending on the subcontractor’s compliance with registration requirements.

The IR35 legislation is now in its 15th year. It was prompted by the spate of employees who would resign, and then provide their services through the medium of a service company (which they would both work for and own) to their clients (who had previously been their employers). In such circumstances, what is now known as the ‘personal service company’ legislation has the effect of deeming the fees received by the service company from the client to be employment income, and taxes the fees accordingly, regardless of whether the employee actually receives the fees, simply leaves them in the company, or the company pays them out as a dividend ( dividends unlike payment of salary, do not attract NICs). Ironically, many employers now prefer contractors to provide their services through a service company, because it shifts the risk and compliance burden from them as clients to the service provider and his company.

More recently, in April 2014, HMRC introduced the ‘false self employment’ rules (formally known as the onshore employment intermediaries legislation). Instead of targeting service companies, these rules target employment intermediaries- essentially agencies and so called ‘umbrella’ companies – which provide the services of ostensibly self-employed workers to clients. Under the legislation, such workers are subject to income tax and NICs via PAYE. These liabilities will fall to the agency to account for. It won’t affect agency workers who are already subject to PAYE, nor will it affect those providing their services under the personal service company arrangement described above. However, it will affect agencies and other intermediaries supplying the services of self-employed workers: unless the intermediary can prove that there is no supervision, direction and control by the client over the worker, PAYE and NICs apply.

The latest change is the consultation published last month on travelling expenses. This is targeted at agencies or ‘umbrella contract providers’ who already apply PAYE. Such entities often do this through the use of what are known as ‘overarching contracts of employment’ (OACs). These contracts are used to place workers on multiple projects at the same time – but under the terms and conditions of one single contract of employment. Presently, employees cannot get tax relief for the cost of travel between their home and workplace unless the travel is to a temporary workplace (meaning one of less than 24 months’ duration), and only then where the employee is unaware whether they will be working at the temporary workplace for the entire duration of their employment. However, where someone is engaged at multiple workplaces under an OAC, they may be eligible for this relief (because they will have multiple engagements often on multiple sites). The abuse being targeted lies in some employment agencies and umbrella companies reimbursing travel and subsistence expenses in return for a deduction in salary, rather than reimbursing the expenses on top of the employee’s wages or salary. This has the effect of reducing the amount of pay that would otherwise have been subject to tax and employees NICs, and also reduces the agency’s employer NICs liability, because the employee’s pay has been reduced.

The consultation recommends two options, both of which will end travel expenses and subsistence relief where an OAC is used. Not surprisingly, this has been welcomed by some, given the obvious avoidance and the potential tax at stake, but there also many contractors for whom involving a third party such as an agency together with an OAC allows a reduction in their personal administrative burden, including the administration of tax and NICs liabilities. Whether they will continue to enjoy tax relief for travel and subsistence expenses will depend on the outcome of the consultation, but whatever the outcome, the history of this sort of legislation suggest this is unlikely to be the last battle fought in this area.

Please note that this summary is not intended to be exhaustive and should not be taken as legal advice on any of the subjects covered. If however you do require legal advice on the subjects covered please contact Philip Alfandary on 020 7955 1424 or

Employment Law Review 2014

13/01/2015 | Philip Minnis
As we embark upon 2015, it would seem an appropriate time to just catch our breath and summarise some of the key employment law developments in the year that was, 2014.   31 Januar

As we embark upon 2015, it would seem an appropriate time to just catch our breath and summarise some of the key employment law developments in the year that was, 2014.


31 January 2014

Changes to TUPE and TULRCA
Several changes to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) and the Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”) came into effect on 31 January 2014, subject to transitional provisions. These included:

  • A transferor now being required to notify a transferee of employee liability information 28 days before a TUPE transfer (where the transfer took place from 1 May 2014) as opposed to 14 days.
  • A contractual change of workplace no longer being rendered void by TUPE. Further, if an employee is dismissed owing to a change of workplace, it will not always be rendered automatically unfair by TUPE.
  • A micro-business being permitted, in certain circumstances, to inform and consult directly with employees directly about a TUPE transfee (where the transfer took place from 31 July 2014).
  • Confirming that a collective redundancy consultation by a transferee with transferring employees can begin before a TUPE transfer takes place and count for the purposes of collective redundancy rules and minimum consultation periods.

6 April 2014

Increase to Tribunal award limits
The statutory cap on the compensatory award in a standard unfair dismissal claim increased from £74,200 to £76,574 (or 52 weeks’ gross pay if less).

The statutory cap on a week’s pay for the purposes of calculating certain awards, including statutory redundancy pay and the basic award in an unfair dismissal claim increased from £450 to £464.

Financial penalties for employers in Tribunal
Where an employer loses a claim in the Employment Tribunal and the case has “aggravating features”, the Tribunal has the power to order the employer to pay a financial penalty of between £100 and £5000 to the Secretary of State.

Abolition of statutory discrimination questionnaires
The statutory questionnaire procedure used by employees or job applicants to ask questions of an employer in relation to an alleged act of discrimination which took place wholly on or after 6 April 2014 was abolished.

However, it was replaced with an informal approach, which is supported by ACAS guidance. For discriminatory acts which took place / began before 6 April 2014, the statutory questionnaire procedure could still be used.

6 May 2014

Pre-claim mandatory conciliation
In the majority of cases, a Claimant must comply with a duty to submit details of their claim to ACAS with a view to participating in early conciliation before they are permitted to commence legal proceedings in the Employment Tribunal.

30 June 2014

Right to request flexible working
The statutory right to make a flexible working request was extended to all employees with 26 weeks’ service, as opposed to just those employees with caring responsibilities.

Further, the statutory regime for flexible working was abolished in favour of a statutory code of practice.

22 July 2014

Badly drafted restrictive covenants
In the case of Prophet plc v Huggett [2014] IRLR 797 the Court of Appeal overturned the High Court’s earlier decision to read additional wording into a badly drafted restrictive covenant in order to make it commercially viable. The Court of Appeal found that the clause in question was unambiguously clear and as such it was not for the Court to “re-make” the parties’ bargain even if it resulted in “a toothless restrictive covenant”. The employer had “made…’s bed and it must now lie upon it”.

1 October 2014

Increase to national minimum wage
The national minimum wage was increased, which included an increase to the minimum wage for workers aged 21 or over from £6.31 to £6.50 per hour.

Equal pay and compulsory audits
Employment Tribunals have the power to order an employer, who has been found liable for breaching equal pay rights to carry out an equal pay audit and publish the results of the completed audit on the employer’s website.

Time off to accompany partner to antenatal appointments
A father or partner is entitled to take unpaid time off to accompany their pregnant wife or partner to two antenatal appointments. The time off is capped at 6.5 hours for each appointment.

4 November 2014

Statutory holiday pay
The Employment Appeal Tribunal handed down its decision in the case of Bear Scotland Ltd v Fulton and another UKEATS0047/13.

The case dealt with a number of issues and included a finding that statutory holiday pay derived from the Working Time Directive (20 days) should be calculated by reference to “normal pay”. This can comprise more than just basic salary and in the instant case, it should have included regular non-guaranteed overtime and travel time payments. This finding followed a decision made earlier in the year in Lock v British Gas Trading Ltd C-539/12 which provided that commission should be taken into account when calculating statutory holiday pay derived from the Working Time Directive.

The case of Bear Scotland also dealt with how far back workers could claim underpaid holiday where it was alleged to form part of a series of an unlawful deduction from wages. It was held that any underpayment that is separated from a later underpayment by more than 3 months was out of time and could not be claimed.

1 December 2014

Shared parental leave and pay
Shared parental leave and pay is available to parents in respect of children expected to be born or placed with them for adoption from 5 April 2015. Eligible employees will be entitled to share a maximum of 52 weeks’ leave and 39 weeks’ statutory pay.


Please note that this summary is not intended to be exhaustive and should not be taken as legal advice on any of the subjects covered. If however you do require legal advice on the subjects covered or any employment law matters please contact Philip Minnis on 020 7955 1508 or


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