Why HMRC’s long-awaited umbrella regulation update is just more of the same

The government's latest endeavour this month to address non-compliance issues within the umbrella market might have stirred anticipation, but does it truly bring anything groundbreaking to the table?

With the release of its response to last summer's consultation on umbrella market non-compliance measures imminent (in our understanding), coupled with the promise of updated guidance and an online pay checking tool from HMRC, one might expect a significant shift in the landscape.

However, a closer look at what the government said about umbrellas on Tax Administration and Maintenace day reveals a narrative that seems all too familiar, writes Louise Rayner, founder of NumberMill Umbrella.

Firstly, this being a long-awaited update from the government begs the question -- is there anything genuinely new here?

Same old, same old?

The government's focus on addressing non-compliance issues within the umbrella market is a recurring theme that has lingered for some time, leaving many wondering if this latest effort will actually deliver tangible results or merely recycle old rhetoric.

Uncertainty

Furthermore, the devil is in the detail. While HMRC outlined the government’s proposed actions on April 18th, the specifics remain shrouded in ambiguity. Discussions around implementing detailed ‘due diligence’ requirements are underway, yet the intricacies of this regime remain uncertain.

Without clarity on how such measures will be enforced and what repercussions await non-compliant entities, scepticism prevails.

The next government’s problem?

Moreover, it's hard to ignore the timing of these announcements.

With the spectre of an impending general election looming, one can't help but wonder if these initiatives are merely a political manoeuvre -- a way to appease public sentiment without truly committing to meaningful change.

By kicking the can down the road, and even into a new administration, this government may be deferring tough decisions rather than addressing the root causes of non-compliance.

It's worth noting that efforts to combat non-compliance within the umbrella market are not without precedent.

There’s already an industry hub named after the government’s new lead proposal

Trade bodies like the FCSA have long been advocating for greater diligence and transparency in the sector. With the FCSA in particular, their new ‘Due Diligence Hub’ serves as a testament to ongoing industry initiatives aimed at raising standards and ensuring compliance.

Tools such as payslip checkers already exist to empower workers to verify the accuracy of their pay.

Tools won’t cut it

And while HMRC's forthcoming online pay checking tool (promised on April 18th) sounds like a potentially welcome addition, it's not groundbreaking in and of itself.

The real challenge lies in fostering a culture of compliance and accountability within the industry -- a feat that cannot be achieved through tools alone.

Of course, one cannot overlook the potential ramifications for the UK contractor sector of introducing measures such as ‘debt transfer.’ While intended to hold non-compliant entities accountable, the ripple effects on the sector could be significant. The concern is not just how businesses will react, but how workers will be impacted by potential disruptions to their employment arrangements.

The devil lies not just in the detail

In light of these considerations, it's clear that while any step towards greater compliance is a step in the right direction, the devil lies not just in the detail but in the implementation too.

Like others in this sector, we welcome progress towards a more compliant umbrella company market, yet true progress will require more than just rhetoric -- it demands concrete action, transparent regulation, and genuine collaboration between all stakeholders.

Our hope – and my message to contractors

At NumberMill, although we support the FCSA’s compliance programme and the development of so many different payslip checking services, we hope that ministers professionalise the sector with licencing similar to that seen in food production with the Gangmasters and Labour Abuse Authority. GLAA themselves are likely best-placed to oversee the sector, given that they are currently monitoring large-scale employers and brush up against umbrella companies already.

As we await further developments -- such as the formal response to Tackling Non-Compliance in the Umbrella Market, it's essential to remain vigilant and hold the government accountable for its promises. Only through sustained effort and unwavering commitment can we truly address the systemic issues plaguing the umbrella market and ensure a fair and transparent working environment for all.