Written by Brabners LLP
UK Government’s Call for Evidence on Umbrella Company Market
On 30 November 2021, the government published a ‘call for evidence’ requesting input from stakeholders on the role of umbrella companies in the labour market, with specific reference to tax and employment rights. The consultation is open for submissions until 22 February 2022.
The government has acknowledged that, by performing employment services for agencies and other businesses seeking temporary workers, umbrella companies may support a more flexible and resilient labour market.
However, the government has also indicated that the rationale for this consultation is that the umbrella company model ‘has presented tax and regulatory challenges’ with cases of poor market practice, worker exploitation, and tax non-compliance. The government is particularly concerned about the use of mini-umbrellas, disguised remuneration schemes, umbrella companies which fail to provide employment rights such as holiday pay, and a lack of transparency in some cases over pay rates, fees and charges. Additionally, the government has indicated that it is interested to hear views about the reasons for the use of joint-employment models.
The government has asked for comments on the reasons why stakeholders work with umbrella companies, advantages and disadvantages they have identified, changes in marketing they have perceived, the extent of due diligence undertaken before selection of an umbrella company, the importance of accreditation, and employment law and tax law compliance etc.
The government has stated that this call for evidence is intended to “complement the government’s commitment to bring umbrella companies into scope for labour market enforcement”.
The government has reiterated its intention to regulate umbrella companies through a new single enforcement body, and it has also set out its intention to introduce legislation which will bring umbrella companies firmly within the legal framework that already regulates employment agencies and employment businesses (namely the Employment Agencies Act 1973, the “Conduct Regulations” and the Agency Workers Regulations 2010).
The call for evidence is therefore billed as a fact-finding mission to understand the umbrella company market, in anticipation of introducing formal legal regulation of the sector.
The government has indicated that it wishes to hear from umbrella companies, workers/contractors, employment businesses, end-hirers, and representative groups and bodies about umbrella company use and practices.
What could this mean for the umbrella company market?
Whilst the umbrella market is undoubtedly under the spotlight, we hope that this consultation will mean good news for accredited and compliant umbrella companies and will present an opportunity for the importance of the industry to be highlighted while placing the focus on non-compliant and fraudulent companies which tarnish the industry’s reputation. This call for evidence and subsequent regulation of the sector could actually go a long way in limiting the scrutiny and generalisation of umbrella companies by third-parties.
How can you contribute to the consultation?
All responses can be emailed to umbrellacompanyevidence@hmtreasury.gov.uk or posted to Umbrella Company Call for Evidence, Personal Tax Team, HM Treasury, 1 Horse Guards Road, London, SW1A 2HQ. The closing date for submissions is 22 February 2022.
This bulletin is for general guidance purposes only and should not be used for any other purpose.
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