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Do We Really Think Contractors Can’t Decide For Themselves?

Last week I posted a few thoughts on LinkedIn in relation to my proposal to abolish umbrella preferred supplier lists (PSLs), which is just one of my recommendations to the government consultation on the umbrella market.  I have many concerns about PSLs and how they operate today, and in some cases they are cartel-like in their behaviour.  Not all by any stretch of the imagination, but some are certainly rotten to the core.

Controversial?

I expected a bit of controversy in my bid to abolish PSLs and there are two main camps – contractors who support the idea of actually being able to choose their employer, and the rest of the supply chain who want to keep PSLs.  Recruitment agencies want PSLs in order to minimise their risk, or generate revenue depending on your view.  Umbrellas who have worked hard to attain their PSL position want to retain it, especially if they have invested significant sums along the way.

Alongside the critics, I had lots of positive responses from key players in the industry, some of whom can’t post their view publicly for commercial reasons.  I also heard some concerns that abolishing PSLs would create a free-for-all in which tax schemes would thrive.  I do worry about this outcome myself, particularly given the loan charge scandal, but then I ask myself some questions…

Why can’t we trust contractors to decide?

Do we really think that contractors can’t make their own decisions when armed with the facts?  Are contractors either gullible or disproportionately greedy?  I have heard both of the latter views expressed about contractors who became victim to the loan charge, however I completely disagree.  Referrals by recruitment consultants played a key role funnelling people into loan schemes with many assuming that the ‘umbrella’ or tax scheme was safe.

Progress has been made since then.  Now that we have Key Information Documents legislation, which must be properly enforced, there is no argument that contractors can’t make their own informed decisions about their umbrella and how they are paid.

Due diligence

And let’s not forget that every party within the supply chain has a duty to do their own due diligence on suppliers, meaning that whatever umbrella firm a contractor might choose will still need to be agreed by the recruitment agency – otherwise they risk falling foul of the Criminal Finances Act* and failing to prevent tax evasion.  So my concerns about a free for all are unlikely to be borne out.  My argument is that if a contractor chooses an umbrella which is compliant, there is no reason to disallow it.

PS – if you’re unsure about the *Criminal Finances Act and requirement for due diligence, my recent podcast with HMRC’s director responsible for this area makes it very clear.  You can listen here.

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