Frances Lewis is head of crew alternate solutions at Osborne Clarke
Before the entirety of June the executive issued responses to the November 2021 call for proof about “umbrella” arrangements within the UK and a session on three alternate solutions for legislation. The session invitations responses on the alternate solutions for regulating umbrella companies. Nonetheless, or no longer it’s no longer clear whether the session involves companies that act as payment intermediaries for payments below the Building Enterprise Draw (CIS) to constructing workers. These are on the total known as “CIS umbrella companies” nevertheless they are now not the same because the umbrella companies described within the session.
It remains to be viewed whether any proposed definition of “umbrella firm” will clutch CIS umbrella arrangements, especially since many of the session assumes a provide chain energetic one or more “employment agencies”, which in a ethical CIS subcontract chain could perhaps presumably also accumulated no longer be the case.
The CIS applies to affords of self-employed constructing workers, nevertheless there’s a risk of HMRC direct where affords are disguised employment.
“The role wants to be clarified to make skedaddle that CIS umbrella companies and products are regarded as as segment of the session”
There’s moreover a historic past of CIS subcontractors claiming rights as workers and company workers, however the truth that they’ve represented themselves as self-employed for tax functions. We possess the role wants to be clarified to make skedaddle that CIS umbrella companies and products are regarded as as segment of the session and to withhold a ways flung from unintended loopholes which can per chance presumably also lead to CIS umbrella companies falling initiate air the definition of “umbrella firm”.
Summary of proof pertaining to to non-CIS umbrellas
- The characteristic of umbrellas in supporting the style in direction of gig working appears to be like to be acknowledged. Users of non eternal workers pause no longer are alive to to battle throughout the rigmarole of inserting them on a formal payroll. Let’s hope any fresh legislation finds a way for of us who trip from immediate assignment to immediate assignment to assign, through one thing love an umbrella, their have pension arrangements and a way of demonstrating the consistency of their profits.
- The be conscious of most traditional vendor lists in some conditions being driven by the need of hirers and staffing companies to catch referral fees is commented on, as is the truth that in some conditions the umbrellas in a position to pay the highest kickbacks are the ones with potentially the most aggressive tax avoidance schemes. It appears to be like exhausting to search out how the executive can command it’s no longer now on uncover of this.
- There is a clear need for guidelines which produce all within the provide chain including workers perceive what they’re being paid and for what.
- About a of the difficulties of an outright ban are mentioned. Even supposing that is in point of fact apt tidy, it appears to be like no longer most likely to make clear an umbrella for the functions of this kind of ban in a way that would now not clutch “harmless” organisations (including executive departments) which every and every once in some time 2d workers to a lot of organisations. We can’t uncover how a ban would work.
Consultation raises questions
The session, which closes on 29 August 2023, raises many questions nevertheless the main ones expose to the three alternate solutions urged by the executive:
- Option one: mandating due diligence. We are now not clear that is the correct manner. Our uncover is that it’s miles a more in-depth than nothing nevertheless that no tests will fully eradicate inappropriate be conscious and we possess dodgy umbrellas will continue to characteristic. And there’ll be a lot of uncertainties for industry about what does describe a sufficient take a look at, with the confusion pertaining to to IR35 tests being an example of this.
- Option two: transfer of tax debt that can no longer be accumulated from an umbrella firm to one other birthday celebration within the provide chain. We clutch into fable this would per chance per chance work well combined with the licensing regime mentioned below.
- Option three: deeming the employment industry that provides the employee to the tip consumer to be the employer for tax functions. This will again work well nevertheless would now not appear to handle the need for gig workers to possess a single umbrella they might be able to work with from gig to gig for the functions mentioned above. It’s moreover unclear whether this option would involve a trip a ways flung from umbrella companies appearing because the employer and, with it, the putting off of umbrella employee employment rights.
Osborne Clarke comment
A key request will be whether the executive will merely outsource compliance by introducing (in option two) a regime that makes dwell users on the dwell of the chain accountable for non-compliance of umbrella companies extra down the chain (as with the 2017 and 2021 IR35 regimes) or (in option three) making the staffing firm that engages workers through an umbrella accountable for tax. Rightly or wrongly, making risk-averse corporates liable tends to persuade the market.
And a request for constructing companies will be whether “CIS umbrellas” will be regarded as as segment of this session at all.