POLITICIANS and business leaders are warning that Cumbria's economy will suffer as a result of tax changes due to come into force this April.

HM Revenue and Customs is planning to do away with travel and subsistence tax relief for contractors and freelance workers.

At present, they can offset travel and subsistence against tax when away from home, at a temporary workplace, for up to two years.

Workington MP Sue Hayman argues that denying contractors and freelancers the right to claim tax relief will lead to a skills shortage as fewer workers will be willing to travel for assignments and work.

The Labour MP said: “I was shocked to discover the impact that cuts to contractors’ travel and subsistence expenses could have on our local economy in west Cumbria.

“Local industry relies heavily on contractors and temporary workers, as do our schools and hospitals. We already struggle to attract staff for vital services, and this would do nothing to help the situation.”

Paul Murphy, general manger of accountancy firm Simplyco at Dovenby near Cockermouth, warned last year that the changes could have a “disastrous” effect on plans for a nuclear new build at Sellafield.

He said: “It takes many thousands of skilled personnel to build a nuclear power station. Labour at those levels cannot be sourced locally and contractors from outside the area will have to be recruited.

“They are unlikely to accept assignments where they will have to pay out for travel and subsistence – including accommodation – from their own pocket if they cannot claim the tax relief.

“Even without these proposals, there is going to be a shortage of qualified labour. It doesn't take a genius to work out that, if we can’t get skilled contractors, we can't bring projects in on time or within budget.”

HMRC argues it is unfair that a permanent employee cannot claim travel and subsistence tax relief while a contractor can.

Doing away with the relief would create a “level playing field” and raise £265m a year in revenue for the Treasury.

The Freelancer and Contractor Services Association has been campaigning against the proposals. Its chief executive, Julia Kermode, expects the change to hit the public sector as well as businesses.

She said: “Abolishing travel and subsistence relief will make it difficult for Cumbria to attract the workforce to fill key public-sector roles.

“It could mean having to pay more to access the skills and talent these workers provide or risk not having the right skills at all. It will certainly put a strain on an already stretched Cumbrian public sector purse.”