The Government is being accused of a “gross underestimation” of the cost of tax changes on construction workers employed via umbrella companies.
A recent HMRC policy document costed out the plan to ban workers employed via umbrella companies from receiving tax relief on their expenses.
The document states that the change “is not expected to have any significant economic impact.” with workers £360 a year worse off.
But construction union UCATT said “this is a gross underestimation of the financial impact on British workers.”
Union experts estimate an average construction worker working for an umbrella company will have £144 of weekly travel expenses.
Under the new law, these expenses will then be taxed at 45% (20%income tax, plus both employees and employers NIC).
This will mean a loss of £64.80 per or £3,369 per year.
The document estimates that 430,000 workers employed by umbrella companies or engaged by “employment intermediaries” will pay more tax.
Brian Rye, National Secretary of UCATT, said: “The attitude of HMRC in belittling the impact this tax change will have on construction workers, working under the yolk of umbrella companies, illustrates the utter contempt this Tory Government has for the British worker.
“In the real world, £3,369 less a year will mean a lot less food on the table.”
“Almost half a million workers will be significantly worse off after April, when this measure is introduced.
“For those that have to travel to several sites for their work the hit will be massive.”
UCATT is campaigning for the complete abolition of umbrella companies.
It believes that normally expenses should be paid on top of wages and not be used to form part of expenses.