Rishi Sunak’s government has, for the foreseeable future, shelved plans to regulate the umbrella industry.  The government had previously announced plans to establish a single enforcement body (SEB), however we understand this will no longer be the case.

The single enforcement body would have unified the three bodies which currently police compliance across areas of employment, providing regulatory reform for umbrella companies and their employees.

The SEB was a manifesto pledge made by the former Prime Minister, Boris Johnson, in the run-up to the last general election.

Speaking to MPs on 13th December, Grant Shapps – the Secretary of State for Business, Energy and Industrial Strategy – confirmed that the employment bill as a whole is no longer “on the cards” for the current government.

There are currently three bodies which enforce compliance with employment laws and regulations: HMRC National Minimum Wage Enforcement, the Employment Agency Standards Inspectorate and the Gangmasters and Labour Abuse Authority.

However, these bodies do not regulate the umbrella sector, leaving umbrella workers unprotected from tax avoidance schemes and rogue operators.

Failure to conduct due diligence when appointing an umbrella company could see contractors unknowingly operating via a tax avoidance scheme.

Contractors should note that just because an umbrella company is being promoted by your agent or regulated by an umbrella body, it doesn’t mean they aren’t a rogue outfit.

We have had a number of contractors approach us with the most horrendous issues so it is important to remember it is your head on the ‘’chopping block’’ and you must always satisfy yourself that the umbrella being promoted is right for you.

HMRC recovers unpaid taxes from scheme participants rather than scheme operators, and thousands of contractors have been hit with retrospective tax bills as a result.

Such schemes disguise pay in non-taxable forms, such as loans, in order to avoid paying the taxes owed. HMRC’s approach to recovering these taxes has been the introduction of the Loan Charge, which handed contractors tax bills totalling in the region of £3.2 billion.

Finally, remember you don’t have to work through an umbrella.  A Personal Service Company (PSC) is a perfectly legitimate, legally compliant and often commercially sensible option for many contractors, and anyone working through an umbrella may want to look for an ‘outside IR35’ contract in order to work through their own PSC. Please contact us for help or advice.