How Rachel Reeves has changed the mileage landscape for temporary workers and agencies

Some of you may have heard that the Chancellor Rachel Reeves has made some temporary changes to mileage allowances as of Thursday 21^st May. The previous relief rate for the last tax year was 45p per mile under 10,000 with it decreasing to 25p per mile for anything above 10,000 miles. This has now been increased to 55p per mile; the price per mile over 10,000 miles will still be 25p. The change to the rate has been altered so it can be backdated to the start of the tax year, meaning contractors that have received mileage expenses over the course of the last two months could be entitled to this backdated amounted.

This is all very exciting news for motorists, as any relief to offset recent rising fuel costs will be a more than welcome respite. However, how does this affect those within the current supply chain? How will agencies have to adapt? Are there any drawbacks? Below, we aim to give a rundown on what to expect from these temporary measures until they are reverted to the original allowance of 45p. We will be discussing the key impacts this will have on how expenses are going to be structured following on from this change.

First and foremost, some of you will know that Clipper offers a payment model named ‘Clipper Total’. This model enables temporary employees to claim expenses through us, assuming they meet the qualifying condition of proving they are free from supervision, direction and control on their temporary assignment and we receive confirmation from the end client to that effect. The changes to mileage expenses has become available for these employees, which will in turn be reflected within our expenses policy. If there is any consideration for using this method of payment for workers, agencies should be mindful of the changes to the Mileage Allowance Payments when creating a payment package.

An additional point of considerations for agencies would be rebillable expenses. This method enables contractors to claim expenses reimbursed by the client in the duty of their role. There is a crucial difference for this method of processing expenses, in that the uplift is not essential to do. While our expenses policy will reflect the changes implement at 55p, the rate at which end clients reimburse employees is up to their discretion outlined in their own expenses policy. What this means for agencies is that they need to clarify that any temporary workers are not automatically entitled to this uplift. If the end-client doesn’t reflect the 55p increase, the worker can claim the difference through their self-assessment tax return.

We understand that expenses are difficult to manage, especially with the recent changes. However, Clipper Contracting has operated within the umbrella space for over 18 years now and can happily assist with any queries you may have regarding the changes.