The UK government has announced new measures to address non-compliance in the umbrella companies market.
- This initiative is part of a broader effort to eliminate malpractice in the labour supply chain.
- A statutory due diligence requirement will be imposed on recruitment agencies and end-clients.
- There are ongoing consultations with the industry to ensure effective implementation.
- Further details on penalties for non-compliance are awaited.
The announcement made by the UK government on Tax Administration Day regarding statutory due diligence in the umbrella companies market signifies a proactive approach to curb non-compliance. This move aims to eliminate malpractice within the labour supply chain, bringing relief to the umbrella and agency sectors, as well as organisations utilising their services.
The introduction of a statutory requirement for end-clients and recruitment agencies to conduct due diligence highlights the government’s commitment to enhancing transparency and accountability. This measure is intended to mitigate risks associated with tax non-compliance and ensure that all parties involved are held to stringent standards.
Despite the promising nature of this announcement, some aspects from last summer’s consultation appear to have been overlooked. Notably absent is the transfer of payroll tax debt from non-compliant umbrella companies to recruitment agencies or end-clients, as well as the imposition of PAYE and NIC obligations on agencies supplying workers from these companies. The absence of these elements leaves residual concerns amongst stakeholders, necessitating the disclosure of full details from the consultation.
Susan Ball, employment tax partner at RSM UK, pointed out the importance of continued engagement with the recruitment industry and other stakeholders. This ongoing dialogue is expected to furnish the government with a comprehensive understanding of the potential impacts of the new regime on organisations employing umbrella companies.
In the interim, organisations are advised to adhere to the HMRC guidance issued in December 2023, which outlines the government’s expectations regarding compliance in the umbrella company market and may serve as a precursor to future regulatory developments.
The government’s announcement marks a significant step towards transparency and accountability in the umbrella companies market, though complete details are still awaited.
