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Government Rejects Calls For Further Umbrella Company Regulation

Thu 3rd Jun 2021

This week, the government rejected calls for amendments to the UK's 2021 Finance Bill that would further regulate umbrella companies.

MPs David Davis and Sir Iain Duncan Smith tabled the proposal to "curb or kill" umbrella companies, giving the government a year to decide how to regulate the sector. The amendments focused on protecting contractors from unscrupulous umbrella companies accused of skimming off pay, holding back holiday pay and participating in acts of bribery via agency kickbacks.

In early May, a report by BBC's File on 4 revealed that 48,000 "mini umbrella" companies had been created over the past five years to reduce recruitment agencies' tax and national insurance liabilities. It was calculated that these companies had cost the Treasury £1bn per year in lost tax revenue.

Despite support from MPs across all political parties, the amendments were not selected to be voted on. However, many industry insiders see the debate as a positive step forward in helping to increase awareness amongst MPs that the government needs to intervene.

Some progress has been made in recent months. HMRC's work highlighting umbrella schemes has gone some way in seeing recruitment agencies review their PSLs to only include providers that have been audited and accredited by independent bodies, like the Freelancer and Contractor Services Association (FCSA).

The REC, the professional body for the UK recruitment industry, has advocated for umbrella companies to be regulated for many years. This week, it announced a set of measures to protect workers and ensure compliance among recruitment businesses. These included a proposed legal definition of umbrella companies for the government to use as a starting point for regulation and a call for HMRC to set up a hotline dedicated to reporting bad practice by umbrella companies.

In May, the FCSA, of which NWM is an accredited member, issued an open letter to the government which reinforced that regulation for the umbrella sector "needs to be implemented and soundly governed" and that an "independent and well-resourced regulatory body needs to be established" to do so. Appointing a regulator who can take action against non-compliant schemes is something that compliant umbrellas, like us, openly embrace and support.

Find out more

NWM is accredited by FCSA, which means we have demonstrated the highest standard of compliance in the professional employment services sector. To find out more about how our transparent and compliant umbrella solution works, connect with a member of our team on 0330 333 4240, email, or head to the Contact Us page to request a callback.

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