Final reminder for contractors to respond to the umbrella consultation (closing today)

Contractors who haven’t replied to the government’s umbrella company consultation are being urged not to miss the “fantastic opportunity” before it closes today at 23.59.

Umbrella companies, end-clients, and especially agencies are being encouraged to reply too, as many didn’t realise the consultation’s three proposals each affect recruiters.

The oversight was plain to see online over the weekend.

'Huge impact on agencies has gone under the radar'

“This doesn’t just affect umbrella companies and contractors; it has a potentially huge impact on recruitment agencies as well.

“And this seems to have really gone under the radar for them and that concerns me.”

To the post -- by umbrella company boss Robert Sharp, of Orca Pay Group, came a reply from a recruiter for the umbrella sector.

“At the heart of this should be the best interests of the contractors. Let’s hope as many people as possible contribute.

“[But quite] honestly, the impact on recruitment agencies is an aspect I had missed,” the recruiter admitted.

'Nobody believes it'll make an ounce of difference'

A legal and compliance consultant at Labvolution, Bernie Payne, says agents have needed approaching and enticing to ensure their take is put into the mix.

“Considering the potential impact of the proposals on recruitment agencies of all types and sizes, I’ve been actively encouraging the recruitment industry to participate, and make sure their views are heard,” Payne says.

Stakeholders sometimes decline to respond to government consultations on the perceived basis that the government has already decided the course of action.

And with the umbrella consultation in particular, it isn’t worth responding to because “nobody believes it will make an ounce of difference,” one ContractorUK reader said on LinkedIn.

'Professional duty to respond to the consultation'

John Whelan, chief executive of My Digital countered last week: “My own view is that HMT, HMRC and DBT are in listening mode, and that is why it is important for the ‘compliant’ voices to be heard.

“It is a professional duty to respond formally to this consultation. Though, it is a tough read, it is worth the time.”

Orca Pay Group’s Mr Sharp echoed, addressing his industry followers: “Your insights are invaluable in shaping the future of our industry.

“[So] don't miss out! The consultation closes on 29th August 2023 at 11:59pm. This is a fantastic opportunity to have your voice heard regarding the proposals to regulate umbrella companies and address tax non-compliance.”

'A bigger issue for officials to get their teeth into'

Ex-tax inspector Carolyn Walsh is among the potentially large group of possible respondents to the consultation, who wish to contribute but not in relation to the three main proposals.

“A bigger issue, which the officials behind this consultation could get their teeth into is to bring about legislation that shores the Key Information Document,” Ms Walsh, a former umbrella company owner told ContractorUK.

“Umbrella companies should be required to pay workers at a specified hourly or daily rate, and not be allowed to convert the gross amount achieved on ‘an umbrella company basis’ to NMW plus commission.

“In one fell swoop, this would force umbrella companies to become open and transparent on pay rates, just as the 2020 regulation relating to KIDs require. It would also block tax avoidance scheme providers masquerading as umbrella companies to pay commission as an untaxed amount.”

'Life-altering impact of schemes'

Blocking schemes sounds good to WTT Consulting managing director Rhys Thomas. 

“We’ve seen first-hand the life-altering impact that these schemes can have on workers, along with the financial and reputational damage impacting organisations that operate within the same supply chain,” he wrote on Friday, adding:

“I for one, never want to see people dragged into these scenarios again. [So] anything that stops people like our clients from falling into the same traps that they’ve been victim to in the past gets my vote.”

'Sort the wheat from the chaff'

The Freelancer & Contractor Services Association sounds as if it will also be contributing to “Tackling Non-Compliance in the Umbrella Company Market.”

“We believe that well-drafted and scoped regulation could do much to sort the wheat from the chaff and protect workers,” the association said.

The drafting of the regulation is on the mind of Lawspeed, a recruitment law firm.

Managing director Adrian Marlowe, who is also chair of the Association of Recruitment Consultancies cautioned: “The umbrella industry is a valuable resource which benefits agencies and contractors, and is a key component in many supply chains.

“It is [therefore] important to get the balance right, to minimise fallout from change whilst correctly and fairly targeting the offenders, not those who are trying to find work for their candidates.”

'Umbrella companies will become as risky as PSCs post-IR35 reform'

Former tax officer Walsh agrees that the devil could be in the detail, with the effect that umbrella companies might lose the edge they gained on April 6th 2017 in the public sector and on April 6th 2021 in the private sector.

“One thing that will more than likely happen [as a result of this consultation] is that umbrella companies will be introduced to workers with almost the same level of risk as PSCs when IR35 was reformed.”

A director at Oblako Ltd, Walsh continued: “Either way, I believe this consultation will change things. Every consultation leads to some legislative change or amendment, and so we can expect more regulations that will apply to umbrella companies.”

The agent who didn’t realise agents like him were affected by the consultation’s proposals, appealed: “It’s so important that all within the industry contribute to this consultation for the benefit of those that use the sector and those employed within. Please use this opportunity.”