Umbrella company regulation backers pin hopes on April 18th 2024

Contractors won’t have to wait as long as first thought to hear new government plans to tackle umbrella company non-compliance.

At Spring Budget 2024, the “next steps” were vowed to be on Tax Administration & Maintenance Day, which last year was April 27th.

But an HMRC paper released post-Budget says Tax Administration & Maintenance Day is going to fall a week earlier in 2024.

'Interesting language'

In fact, the policy paper, ‘Spring Budget 2024: Overview of tax legislation and rates’ states:

“The government will bring forward a further set of tax administration and maintenance announcements on 18 April 2024.”

Brookson’s Matt Fryer, who first spotted the 2024 date, says wording in the initial announcement (at Spring Budget), may be telling.

“The language used here is interesting,” he said of HMT saying the update will be on ‘non-compliance in the umbrella company market.’

“[In particular] ‘non-compliance in the umbrella company market,’ implies they may not view umbrellas as being the sole offenders.”

'Spreading the net'

Clarity Umbrella’s Lucy Smith makes the same inference.

“I will be interested to see…whether they are focusing on umbrella companies, or if they are spreading the net a little wider”.

APSCo, Workwell, and Smith herself (at an HMRC roundtable), have already warned against collateral victims, notably contractor recruitment agencies.

'Due diligence and debt transfer'

The latter will be keen on April 18th to read any government decisions on “due diligence and debt transfer,” says Fryer.

But bonafide brollies could be adversely affected too, if "umbrella company" has been poorly defined, Brookson’s boss hinted.

Either way, the 18th of next month can’t come soon enough for Professional Passport’s Crawford Temple.

'Rampant tax non-compliance'

Boss at the compliance organisation, Temple says “rampant tax non-compliance” has been “plaguing the umbrella market” for too long.

“This systemic exploitation has been allowed to fester,” Mr Temple began in a statement to ContractorUK.

“[It’s created] an unlevel playing field that punishes compliant firms while allowing shady operators to thrive unchecked.

"The evidence of widespread abuse and misconduct is overwhelming and impossible to ignore.

"Enough is enough. Consultation after consultation has been launched, evidence gathered, and options explored ad nauseam.

“Yet over two years after the initial call for evidence into problematic umbrella companies, meaningful enforcement action remains elusive, as the can continues to be kicked down the road.”

'Surprising'

John Williams, a tax director at Moore Kingston Smith, a chartered accountancy firm, told ContractorUK that it was “surprising” for Spring Budget to kick the can even further down the road.

“[As well as surprising] the lack of immediate action concerning non-tax compliance among umbrella companies, which has been a major issue affecting the contracting sector for some time, leaving workers including nurses and teachers through to IT workers, with unexpected and substantial underpayments of income tax and NIC, was unfortunate.

“Proposed options [by the government in a consultation last year] ranged from mandating due diligence when using umbrellas, through to deeming the employment business which supplies the worker to the end-client to be the employer for tax purposes.

“It is hoped that any measures that may be introduced at this update are focused," Williams said, "and proportionate.”

'Experience told me not to expect anything'

Shelley Ankers-Wainwright, who vets umbrellas for HMRC compliance, says her “experience told me not to expect anything” significant on umbrellas from the chancellor.

A director at SAW Consulting, she told ContractorUK: “In relation to the umbrella consultation... one paragraph promising an ‘update’, and [another] vowing ‘new guidance’ in summer 2024 [is all the Budget contained on brollies]”.

Online, some suggest a commitment to provide guidance on using a brolly following a commitment to update on legislative plans means the legislative plans can’t add up to much.

Other social media users prefer that despite concerns last year that umbrellas may be rendered redundant, guidance being pencilled in after the update indicates their usage will continue.

'High on the government agenda'

To the Freelancer & Contractor Services Association, the mention of umbrellas signals that the government is still listening.

“FCSA particularly welcomes the announcement in paragraph 5.42 of the Red Book regarding tackling non-compliance in the umbrella market,” FCSA’s Chris Bryce told ContractorUK.

“It’s good to see that the umbrella regulation we’ve long called for is still high on the government agenda.”

But it is the agenda featuring items which never seemed to get ticked off that bothers Orca Pay Group’s Rob Sharp.

'Crying out'

“Anything that leads [us closer] towards the long, long, overdue regulation they promised many years ago…[is] positive,” Mr Sharp said, referring to the government’s statement of legislative intent back in 2021.

Taking to LinkedIn last week, Orca’s CEO added: “God knows the industry is crying out for it more than ever!”

At Professional Passport, Mr Temple echoed: “For far too long, the government has allowed unscrupulous players to line their pockets through disguised remuneration and other illicit practices while hard-working individuals suffer the consequences.

“Only strict enforcement from HMRC, armed with greater resources to expand its dragnet, can finally shift the incentives away from non-compliance.”

'Let's just hope...'

SAW Consulting’s Ms Ankers-Wainwright sounds equally aware that the date of April 18th 2024 is a long time in the making.

Yet speaking last night, with over five weeks still to go, she cautioned readers of ContactorUK: “Let’s just hope it’s worth waiting for!” 

From a legislative perspective at least, it will be, according to JMW Solicitors’ head of employment law Paul Chamberlain.

Of Thursday April 18th, Chamberlain posted: “This could be a very important day for the umbrella and agency sectors. One thing is for sure - the current status quo won't be maintained.”