Government calls contractors to give evidence on umbrella companies

The biggest statement of intent yet on regulating umbrella companies has been published in the shape of a HM Treasury consultation, ‘Call for Evidence: Umbrella Company Market.’

Spanning some 40 pages, the consultation is aimed at providing the government with an “up-to-date and well informed view” of how umbrellas operate.

It is open until February 22nd with responses to be emailed here.

And posing 38 questions, the HMT paper specifies it wants replies from contractors, ranging from brollies’ benefits to, bravely, the government’s “understanding” of ‘concerning behaviours.’

'Very interesting for ContractorUK readers who want to be influential'

Julia Kermode, founder of IWORK welcomes the government deciding to name the names of who it wants to hear from – an improvement on the usual ‘stakeholders.’

“It’s very interesting HMT specifically asks for responses from people working through an umbrella,” she said, while acknowledging the consultation co-authors BEIS and HMRC.

“So if ContractorUK readers want to influence the shape of future regulation, which is coming as the consultation calls itself a ‘complement’ to enforcement, this is their chance.”

'Compliance'

The five-chapter document is also a chance for contractors (as well as ‘umbrellas, employment businesses and end-hirers’) to respond to two big admissions by the government.

First, and the more tentative of the two, the government finally recognises that April’s IR35 reform “may” have made the umbrella company model comparatively more attractive.

Second, (at 2.9) the government acknowledges the “efforts” of industry bodies to embed “compliance,” but explicitly says “accreditation is not a guarantee of compliance.”

'Encouraging'

Unfazed, Professional Passport says it welcomes the consultation, but the compliance group sounds cautious of the government disappearing down rabbit holes.

“It is encouraging to hear that the Treasury, HMRC and BEIS will be working together to address the issues”, began the group’s CEO Crawford Temple.

“However, 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.”

'Complicated'

Mr Temple added his hope that the call for evidence does “not delay the essential need for more visible action and enforcement right now” against schemes and their promoters.

“The umbrella sector is complicated,” says IWORK’s Ms Kermode. “How to regulate it…, holiday pay [and] payroll skimming are among the topics they want to hear about.”

The multi-faceted, interconnected nature of the intermediaries market may explain another adviser’s reaction to the consultation, released as part of yesterday’s Tax Administration and Maintenance Day.

'The more information we give HMT, the better'

“The more information [industry can send in response to the consultation], the better,” said the adviser, ReLegal Consulting’s Rebecca Seeley Harris.

Another status expert Kate Cottrell, sees the consultation as a ‘now or never moment’ for those with feedback, as the government “clearly…is set to sort it [the umbrella sector] out.”

“This is long overdue and very welcome,” the Bauer & Cottrell co-founder said.

“Government clearly understands this market…[but] let’s hope there will be no unintended consequences as a result of any reform.”

'Finally moving'

Yet unlike the consultation itself, which was not expected, nothing will hit umbrella companies or their workers overnight.

“All the decent players in the industry are keen to see uncompliant practices stamped out but nothing is likely to change for at least 12 months -- to allow time for responses to be analysed, policy established, and legislation written,” Ms Kermode said. “But at least things are now finally moving in the right direction.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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