Policy Proposals put forward to Government to Regulate Umbrella Companies
CEO of inniAccounts and founder of offpayroll.org.uk, James Posyer and Chair of the Employment Status Forum, Rebecca Seeley Harris have submitted a draft policy to the Treasury and the Department for Business, Energy and Industrial Strategy in recent days entitled ‘Umbrella companies – Call for Regulation’.
Managing director of Integra People, recruitment consultant business whose head office is based in Birchwood, David Lewis says “umbrella payroll companies should have a regulation body to ensure that there is a level playing field across the sector, in the same way the recruitment sector has. This would stop umbrella companies not being ethical in the way that treat workers. It would also ensure that taxes are collected appropriately for HMRC.” He added, “At Integra People, we operate as a complaint business, other companies taking advantage of loopholes and using unethical mini umbrella companies is slowing down growth for businesses like ours. As a country, businesses should be looking to pay tax the right way, that’s how we will prosper as a whole country, especially when it comes to paying off debts created by government spending during Covid-19.”
IR35 legislation has been adapted over the years, introduced originally in 2000, with the most recent adaptation in April 2021. The latest update means that going forward, medium to large businesses must review and assign the tax status of off-payroll contractors they hire. Since the introduction of IR35, the UK has seen a surge of umbrella companies in an effort to reduce costs and taxes. According to BBC File on 4, 48,000 “mini umbrella” companies have been created in the last 5 years. The updated IR35 (April 2021) are controversial to many of these companies who believe the new legislation would raise costs and damage the ability to use freelancers and the self-employed.
The draft policy put forward by the two leading industry experts comes to light after the BBC last week exposed more than 40,000 people from the Philippines have been recruited to front British companies as part of schemes costing the UK hundreds of millions of pounds in lost taxes.
According to inniAccounts, who James Posyner is CEO for, inniAccounts, “71% of workers deemed inside of IR35 were moved under an umbrella company ahead of the off-payroll working rules extension into the private sector” that came into force earlier this year.
The proposal includes a number of policies that urges the government to act on including the appointment of a director of labour market enforcement who would provide strategic direction to the industry. Other policies suggested include:
- For the government to identify whether to form a Single Enforcement Body or to expand the remit of the Employment Agency Standards Inspector to oversee regulation.
- To consult on whether the existing legislation, Conduct of Employment Agencies and Employment Business Regulations, 2003 is appropriate to regulate umbrella companies.
- To establish what type of regulation is needed in the labour market to ensure compliance.
- To consider whether the umbrella companies and other intermediaries should be licensed.
- To consider whether there should be not-for-profit umbrella co-operatives, similar to other countries.
- To ensure that any legislation also protects the rights of workers and that there is an enforcement body that can assist in recovering holiday pay on behalf of workers.