Frustrations among experts in the umbrella sector are reaching boiling point as the government continues to ignore it’s promise to regulate the sector, and 14 months later has still not published their response their consultation on the umbrella market. This lack of action leaves an ever-increasing population of umbrella workers unprotected in an unregulated industry where, by HMRC’s own admission, the vast majority of marketed tax avoidance schemes operate. But at what point does the silence become negligence?
What are the facts?
The government first formally acknowledged the need to regulate the umbrella sector in response to a recommendation in Matthew Taylor’s ‘Good Work Plan’ published in July 2017. In November 2021, a consultation was launched to explore the role of umbrella companies in the labour market amid concerns about tax avoidance and unlawful working practices. The consultation closed in February 2022.
However, well over a year later, the government has not issued a response or confirmed when it will publish its findings. This is despite the significant increase in umbrella working in the UK which, according to official data, grew from around 100,000 workers in 2007/08 to well over 500,000 by the 2020/21 tax year – a 400% increase.
What are experts saying?
Fred Dures, founder of specialist payroll auditor, PayePass, commented: “500,000 umbrella workers is a conservative estimate, too. Since the roll-out of the off-payroll working rules, it’s widely acknowledged that tens, if not hundreds of thousands of people have started working via umbrella companies.
“The silence is deafening. The longer the government buries its head in the sand, the more workers there are exposed to tax avoidance schemes. To make matters worse, these schemes see billions in tax slip through the net – at a time when the economy and public services need it.”
Why does it matter so much?
Here at IWORK, we share the collective frustrations of everyone, but particularly the workers who are affected. We see firsthand the impact of tax avoidance schemes on the lives of people who simply undertook some short-term work and got paid for it through a company recommended by their recruitment agency. Often it never occurred to victims that it might be anything other than legit – until they receive a very large tax bill.
So the government knows that there is a problem, and that it is a growing problem. Their figures show a significant increase in numbers of umbrella workers, plus an increase in individuals using tax schemes, so surely they have a duty of care to act? And surely by continuing to do nothing (despite knowing the impact of doing nothing) they are being negligent?