Umbrella companies unable to get over 'disappointment' of a silent Autumn Budget 2021

The Freelancer & Contractor Services Association has spoken out about its disappointment that Autumn Budget 2021 was silent on the regulation of umbrella companies.

Phil Pluck, FCSA’s CEO, said the chancellor appeared to have “missed an opportunity” to put on record his support for “future legislation or investment in [existing] enforcement.”

Crawford Temple, CEO of Professional Passport agreed, telling ContractorUK in a statement that it’s “disappointing” non-compliance by brollies was not addressed by Rishi Sunak.

“In an unregulated industry, working through approved, accredited, compliant umbrellas must [now] be reinforced [as a result of Mr Sunak omitting regulation].”

'Under the radar'

Clarke Bowles, a director at Parasol believes that Autumn Budget containing a signed-off funding package for the Single Enforcement Body (SEB) isn’t all that has been overlooked.

“One announcement that went slightly under the radar… actually came earlier this month,” he says.

“[It is an HMRC] document titled ‘Check how to reduce your risk of using an umbrella company who operates a tax avoidance scheme.’"

Bowles says it represents a “step in the right direction,” but HMRC releasing the document just before the Budget “underlines the need for the government to do more” on brollies.

“We had hoped to [at least] see further talks around improved regulation for umbrellas,” he added, “but it seems that this isn’t on the government’s priority list at the moment.”

'Significant dent'

In an exclusive Budget calculation for ContractorUK, IR35 Navigator said on Wednesday that umbrella contractors were typically now facing a take-home pay dent of £1,782.   

So brolly contractors may be doubly disappointed -- at both no new statutory protections and no new mitigations to soften the blow of National Insurance soon rising by 1.25%.

“This will be a significant dent to the household finances [of umbrella contractors],” says IR35 Navigator CEO Chris Mattingly.

“[Especially] when you consider that many of these umbrella workers are working in Health, Social Care and Education.

“So the expected public sector pay increase will need to be substantial -- if it is to offset the additional costs umbrellas workers now face.”

'Little in terms of detail'

With similar key workers in mind is the FCSA’s Mr Pluck.

“The chancellor states that there will be 50,000 more nurses…[but] there appeared to be little in terms of detail as to how we and other sectors can be supported”.

In an online post, he continued: “The FCSA observes a lack of any form of notice around the further protection of workers and regulation of the outsourced sector… which [we have] been campaigning for over many years.”

But it is the association itself which is now facing questions – and notably from one of the most populous All Party Parliamentary Groups, following the FCSA’s decision to expand its membership charter to include UK umbrella companies who have up to 25 per cent of their solutions or structures offshore.

'Troubling change'

On behalf of the Loan Charge & Taxpayer Fairness APPG, three MPs tell Mr Pluck in a letter: “This seems a troubling change, that goes in the opposite direction that we would have expected the FCSA to go, considering all the concern about contractors and freelance workers being mis-sold disguised remuneration schemes, many of which involve offshore arrangements.”

The October 21st letter, written by the DUP’s Sammy Wilson, the Conservatives’ Greg Smith and Labour’s Mohammed Yasin, asks the FCSA to clarify its operations and intentions in five areas.

Yet in a potential blow for those who want to see “even better” prioritised, worked on, and achieved by all who audit and police umbrellas, malicious cloning of umbrella companies appears to now be preoccupying such brolly overseers too.

In fact, the FCSA confirmed to ContractorUK that an imposter website purporting to be its genuine portal for its members, and for umbrella contractors as a whole, is now online, appearing to be a sophisticated ‘spoof’ impersonator site.

'Work in progress'

While the precise motivation of the site’s creators is unclear, the first bout of cloning (which affected genuine Companies House registrants) was seized on as further grounds to regulate umbrella companies, or at least have them more tightly policed by either the SEB or a beefed-up EASI.

But expecting the chancellor to take such regulatory action in one foul swoop at Autumn Budget 2021 was potentially unrealistic.

“[A Workers’ Watchdog or similar body] has been a work in progress for the department of Business, Energy and Industrial Strategy for several years now,” reveals Chris James, director of accounting services at JSA Services.

“And the [forthcoming] Employment Bill is going to be the business department’s chosen response to concerns in the umbrella sector. Umbrella regulation isn’t a tax issue, so there’s no reason for it to have appeared at last week’s Autumn Budget.”

'Not too much should be read into regulation omission'

Keith Rosser, a director at Reed is another industry leader who isn’t losing sleep over the SEB not featuring in the chancellor’s Red Book.

“In reality, plans for regulation of the umbrella sector continue as they were -- as do the plans for a Single Enforcement Body,” he wrote after Wednesday’s Budget, adding:

“So not too much should be read into their omission.”

'Shameful'

But even reasoning isn’t reducing the still widespread disappointment.

“It’s a real shame that the government didn’t take the opportunity to make a real difference to our sector,” Compass Contracting’s co-founder Ashley Olliver said last night.

In a statement to ContractorUK, Mr Olliver added: “The irony [for the chancellor] being is that if he did then the government would collect more legitimate and much-needed tax through legitimate and compliant brollies, as opposed to allowing the promoters of tax avoidance schemes to continue operating almost without any recourse. Shameful really.”