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Have your say on regulating umbrella companies

2-minute read

Have your say on regulating umbrella companies
Sam Bromley

Sam Bromley

21 December 2021

As the government launches its consultation on umbrella companies, the results from a Simply Business poll show that the majority of readers are in favour of regulation.

Following the Autumn Budget, we previously reported on the government’s plans to regulate umbrella companies.

We included a poll in the article that asked whether umbrella companies should be regulated. Out of 74 respondents:

  • 80 per cent said yes, there are too many issues in the industry
  • 12 per cent said no, the industry is OK
  • 8 per cent said the industry’s problems should be solved in a different way

The government wants your thoughts on the umbrella company market

Simply Business readers that show an appetite for regulation will be pleased that the government has issued a call for evidence on the umbrella company market.

The consultation explicitly wants to capture “a wide range of experiences of respondents”. So whether you’ve worked through an umbrella company or have experience with them in general, this is your chance to have a say.

The consultation invites views on:

  • the role that umbrella companies play and their utility in the labour market
  • how they interact with the employment tax and employment rights systems
  • the government’s understanding of market behaviours that are causing concern

What’s wrong with umbrella companies?

Umbrella companies simplify employment status. You become an employee of the umbrella company, which acts as an intermediary. Then you get paid through PAYE, with costs like taxes, National Insurance contributions and workplace pension payments deducted.

While most umbrella companies operate legitimately, April 2021’s IR35 changes have forced more contractors into umbrellas – and sometimes non-compliant ones.

Non-compliant umbrella companies often push so-called disguised remuneration arrangements, in which workers are paid in apparently non-taxable loans to avoid National Insurance and income tax.

In response, the government has already launched a 'Tax Avoidance – don't get caught out' campaign to encourage the self-employed to be vigilant.

Speaking to ContractorUK, Crawford Temple, the CEO of compliance review service Professional Passport, said it’s encouraging the government is addressing the issue.

But he went on: “It is important to stress that whilst policymakers are working out a more informed approach to the workings of the umbrella sector, I would like to remind them that disguised remuneration schemes and tax avoidance schemes are continuing to thrive.”

How to respond to the consultation

After reading the call for evidence, you can email [email protected] or reply by post. The deadline for responding is 22 February 2022.

What do you think about the government’s call for evidence on umbrella company regulation? Let us know in the comments below.

Photograph 1: David/stock.adobe.com

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