Umbrella company consultation is progress, but regulation will be difficult

Responding to the open consultation Tackling non-compliance in the umbrella company market published yesterday, Tania Bowers, Global Public Policy Director at APSCo comments:

While this is a significant consultation that will require a lot of input and insight from the staffing sector to ensure any regulatory change is fit for purpose, it is promising to see that HMRC is committed to driving long-term changes in umbrella regulation which we believe are necessary.

Looking at the detail that is currently available, the options on defining an umbrella company into law is something APSCo will need to engage fully with members on, as any definition could create opportunities for avoidance by unscrupulous umbrella businesses.  

We are pleased to see that the Government is looking to set statutory compliance standards for umbrella businesses which is in line with our initial recommendations last year. However, rather than placing more responsibility on the umbrella industry itself, forcing it to mature, through requirements such as client accounts for workers’ pay and regulatory enforcement on directors and officers akin to that seen in financial services, Government are once again seeking to rely on passing legal and tax risk up the supply chain to employment businesses and end hirers. We already see the uncertainty around potential HMRC enforcement that Off Payroll and Managed Service Company legislation has created, with hard-to-quantity, long-tail potential liabilities. We can understand the attractiveness to Government of the seemingly simple logic of debt transfer to employment businesses or a further deemed employer regime. However, in the long term, this could create further uncertainty in the UK’s highly regarded and vibrant recruitment and outsourcing sectors, so vital to the productivity of the labour market and the future of work agenda.  We will be working closely with our members to ensure that the voice of the professional staffing sector is brought to the table amid what looks set to be some significant changes to umbrella regulation.

While it will be the finer details that need to be informed by the insight of the recruitment sector, it is a promising sign that HMRC is taking a carefully considered approach to an issue which – given the significant number of initial responses to the consultation last year – is clearly a prime concern for workers, recruiters and end hirers. It’s clear that the Government is being ambitious in its plans to tackle the unscrupulous behaviour of rogue umbrella firms, but any such changes should not be to the detriment of employment businesses and the wider economy”