Contractors, is your umbrella open to criminal prosecution on June 27th?

If it was surprising that the big business-esque corporate criminal evasion offence could impact the seemingly far-removed contractor sector, it must be even more surprising that new anti-money laundering regulations will do so too – and imminently, writes Carolyn Walsh, managing director of CWC Solutions.  

Indeed, on Tuesday June 26th, some umbrella companies will be technically committing a criminal offence if they continue to pay workers, or offer tax advice, if they have not registered with one of 22 supervisory bodies recognised by the government.

These 22 regulatory bodies (such as the ICAEW and the ACCA, both of which we have registered with) have a new overseer -- the Office for Professional Body Anti-Money Laundering Supervision. This body, ‘OPBAS’ for short, has been established with the sole aim of strengthening Anti-Money Laundering (AML) regulations.

It’s come about because the government has quite understandably decided that if it’s right that people with criminal convictions cannot obtain professional membership of an accounting body, then it must be right that people with convictions should face the same restrictions if they’re involved in accounting where there is no licensing.

This new requirement for tax professionals to be approved by a supervisory body will weed out quite a few charlatans that are operating in the accountancy sectors, which can only be ‘a good thing.’ But it’ll affect the umbrella and payroll sector too, because the fee income these businesses generate comes from managing client companies’ payrolls. These clients rely on the payroll/umbrella company for tax advice, and some of these businesses are even involved in filing personal and company tax returns. It’s therefore likely that many umbrellas – yours potentially if you’re a contractor using one – falls inside these new, stronger regulations.

What does that mean for your brolly? Well, as an affected beneficial owner, officer or manager – in effect, the umbrella’s senior decision-makers (so definitely partners, directors and company secretaries too), they will need to gain approval from one of the 22, saying that they have no unspent criminal convictions. This is achieved by them undergoing a DBS check.

Has your umbrella had a DBS check ahead of next Tuesday? If it has (and it passed), then relax, as its personnel are not risking going to jail for non-compliance with the update to the AML regime.

If you’re reading this as a body or association that’s not listed as one of the 22, it must be a worrying time. Especially because it appears that the professional bodies that supervise the accountancy and finance sectors have closed ranks to exclude any non-members under pain of prosecution under this amendment to the AML regulations. Fortunately though, if a body wishes to become a “professional body AML supervisor,” it can go forward to OPBAS and apply.  

Generally-speaking, it’s probably a busy time for most brollies as the 26th fast-approaches, because very few of them in my experience have managers and owners who belong to an organisation recognised by the government . And remember, existing stamps of compliance might not hold up after the 26th, if the outfit that stamped it is NOT on the list of the 22.  

What will happen, in terms of enforcement come next Tuesday, remains to be seen. But my feeling is that these strengthened AML requirements may simply knock out a number of umbrella companies. As the corporate criminal evasion offence is already in force and affecting the contractor sector, a cynic might say that the government is intentionally creating a perfect legislative storm so that umbrellas are too busy -- or too short of space to manoeuvre, to sidestep any further reform of IR35. But far be it for me to be a cynic!