During a parliamentary discussion of the Finance Bill earlier in the week, the issue of umbrella company regulation was discussed by MPs. Scrutiny of umbrella companies and calls for tightened regulation have been increasing in recent weeks following reports regarding tax evasion and the employment rights of self-employed workers.
In parliament, MPs David Davis and former Conservative leader Sir Iain Duncan Smith advocated strongly for changes to be made to the Finance Bill in order to increase regulation of umbrella companies.
Proposed changes would seek to curb tax evasion schemes operated by “mini umbrella companies” and stop agencies forcing contractors into tax avoidance schemes. Campaigners also hope to eliminate unlawful deductions of freelancer holiday pay and the reportedly widespread practice of agencies being bribed with “kickback” payments in order to recommend umbrella companies to contractors.
Despite the interventions of some MPs, however, the government did not act to add the proposed “curb or kill” amendments to the Finance Bill, prompting widespread criticism from the freelance sector. ContractorCalculator CEO Dave Chaplin said it was a “missed opportunity” and compared the current, unregulated umbrella company market to the “wild west”.
Chaplin added: “The continued lack of regulation and impotence by the government on this issue will only seek to fuel the non-compliance further and I would suggest contractors conduct due diligence before signing up to any umbrella company.”
Offpayroll.org.uk founder James Poyser and Employment Status Forum chair Rebecca Seeley Harris, who recently submitted a draft policy on umbrella company regulation to the government, said that regulation was now the only option following the failed amendments.
However, some were more upbeat, reflecting that the debate will have delivered a message to the government that urgent action is needed on umbrella companies and that regulation is overdue.
Author: Steven English