Lets hear it for compliance
After reading the HMRC publication its response to the 2023 consultation on tackling non-compliance in the umbrella company market, my overriding hope is that we are moving it the right direction. The government has now confirmed measures to regulate umbrella companies, attempt to reduce tax evasion and move tax responsibilities up the chain.
The aim of the response is to ensure that there is:
- Focus on Compliance: The government has outlined measures to address non-compliance in the umbrella company market, aiming to protect workers and ensure fair practices.
- Zero-Tolerance Approach: Plans to introduce stricter regulations and enforcement mechanisms to tackle malpractice within umbrella companies.
- Worker Protection: Emphasis on safeguarding workers’ rights and ensuring they are not exploited by non-compliant umbrella companies.
- Industry Collaboration: The government intends to work closely with industry stakeholders to implement these measures effectively.
Clarity did not seem to be the aim of this response and has left the industry with many unanswered questions. Not least the fact that we are still waiting on a definition of what an Umbrella company is. We are all going to have to wait until the draft legalisation is produced, at this point we can see how this industry is going to have to change moving towards April 2026.
It is, however, very likely that the responsibility for PAYE tax deductions will be shirted to agencies and end clients. This may not mean that the agency must operate PAYE but has to be secure that its suppliers are complaint and operating the true deductions to payments.
My glass half full approach to reading this legislation is that if you are a compliant Umbrella company, if you engage with compliant umbrella companies, if you have done your due diligence to ensure that your contractors are having the correct deductions then you may not be affected at all by legislative change. Optimistic…maybe.
It is extremely important as we wait for more information that people see the changing tide and act now in auditing or changing umbrella providers to ensure that you are not caught out, don’t wait.