Representatives of the UK’s contractor industry have criticised Chancellor Rishi Sunak over his failure to mention the regulation of umbrella companies in his recent Autumn Budget. Contractor bodies and other organisations have been calling for increased regulation of umbrella companies amid growing concerns over non-compliance.
Umbrella company usage has grown in the UK, particularly since the introduction of IR35 rules in April 2021, with contractors turning to the companies in order to avoid these rules and ensure they don’t see a decline in take home pay.
However, this has led to concerns over the number of contractors that may be (usually unwittingly) working with non-compliant providers, with many more companies having entered the marketplace as a result of the rising demand.
Often, contractors will be enticed into non-compliant umbrella arrangements through promises of higher take-home pay or lower rates of tax. These kinds of incentives often cover up tax avoidance schemes.
Tax advice charity TaxAid said earlier in the year that it has experienced a 37 per cent increase in inquiries regarding umbrella companies. Many of those getting in touch had been unknowingly engaging with an umbrella company running a tax avoidance scheme and, for some, had only realised when they were contacted by HMRC.
Despite such concerns, however, the Chancellor made no mention of increased regulation for umbrella companies or efforts to tackle non-compliance in his Autumn Budget, leading to criticism from some in the contracting sector.
Phil Pluck, CEO of umbrella company accreditation body the Freelancer and Contractor Service Associate (FCSA), claimed that Rishi Sunak had “missed an opportunity” by not mentioning the issue in the Budget.
Author: Steven English