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Government announces next step in umbrella compliance

“Tax Administration and Maintenance Day” typically doesn’t attract a lot of buzz, but this year April 18th was highly anticipated for an announcement on how the government plans to tighten the reins on compliance in the umbrella market.

So here it is:

The government remains concerned about the scale of non-compliance in the umbrella company market, and the detrimental impact that this has on workers, taxpayers and the labour market. Last summer, the government consulted on options to reduce tax non-compliance in the market and will publish a response to its consultation in due course.

To support workers and businesses that use umbrella companies, HMRC will publish new guidance later this year, including an online pay checking tool to help umbrella company workers to check whether the correct deductions are being made from their pay.

The government is minded to introduce a due diligence requirement to drive out bad actors from labour supply chains. To this end it will continue to engage with the recruitment industry and other key stakeholders on the detail of a statutory due diligence regime for businesses that use umbrella companies, and ensure it has the best understanding of the impacts that this could have on reducing non-compliance.”

Key takeaway: Mandatory Due Diligence

While it could be said that in some respects the government has kicked the prospect of umbrella regulation further down the road, the key takeaway from this latest announcement is that there will be mandatory due diligence for businesses using umbrella companies to pay their contingent workforces.

We welcome this announcement as an important step in weeding out the bad apples that exploit workers and give the umbrella market a bad name. This isn’t just a regulatory update, it’s a comprehensive overhaul intended to restore trust in the contracting sector by identifying and eradicating malpractice and ensuring that umbrella companies operate in a fair and transparent way. 

Mandatory due diligence incoming. I for one am extremely pleased the government has taken this approach and I am intrigued to see how this will develop. I am dedicated to supporting the government (whoever that may be!) in this endeavour. For too long bad actors have tarnished the industry I love and support. Times up!”

What the legislation will look like remains to be seen, but we believe this is incredibly positive news for contractors, recruitment agencies and compliant umbrella companies alike. At Liquid Friday we are keen to participate in this process and contribute to fit-for-purpose legislation that addresses the industry’s requirements while protecting tax revenue and workers’ rights. Watch this space! 

Update and Analysis from our COO