Finance Bill amendments to curb umbrella company malpractice fail to get traction in UK Parliament
- Reference: 1621953009
- News link: https://www.theregister.co.uk/2021/05/25/finance_bill_amendments_to_curb/
- Source link:
Last week Conservative MPs David Davis, Sir Iain Duncan Smith, and Andrew Rosindell [1]proposed changes to the UK's 2021 Finance Bill urging the government to introduce legislation to clamp down on intermediary employment firms, which campaigners say have mushroomed as temp agencies and end-user businesses avoid directly hiring contractors judged to fall within the IR35 "off-payroll working" tax law, introduced this year.
James Poyser, CEO of inniAccounts and founder of campaigning website offpayroll.org.uk, said the [2]flood of new contractors into umbrella companies was exacerbating problems with a largely self-regulating system .
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But last night in Parliament, politicians determined that the amendments would not put forward to the vote and would not be included in the Bill.
Rebecca Seeley Harris, chair of the Employment Status Forum, together with Poyser, founder of offpayroll.org.uk, who [6]proposed the amendments recently , said in a joint statement:
“It’s disappointing that the amendments tabled were not put forward to a vote, especially after such a compelling debate that recognised the employment rights people lose when they are forced into an umbrella.”
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They said further regulation, which would have a more lasting impact on the umbrella industry, was the "only way ahead."
The two campaigners had put forward policy proposals entitled "Umbrella companies - Call for Regulation" to Jesse Norman, the financial secretary to the Treasury, and Paul Scully, the Parliamentary undersecretary of state in the Department for Business, Energy and Industrial Strategy.
Conservative estimate suggests the value of unpaid holiday pay to umbrella company workers in 2016 was at least £1.8bn. It is also estimated that £4.5bn is misappropriated mainly from workers but also from HMRC in the sector of employment agencies and intermediaries, the pair said in their statement.
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Speaking in Parliament on Monday, former Conservative leader Iain Duncan Smith, who had suggested changes to the bill, said agency workers had suffered umbrella companies “taking kickbacks, problems over holiday pay and skimming off the assignment rate”.
“Some contractors sign up to use these specific companies believing them to be compliant then discover they're employed by one with a different name, and by a director, say in the Philippines,” he said.
David Davis, former secretary of state for exiting the European Union, pointed out that 48,000 of these companies have been created in the past five years. He said problems in this area had been “proven beyond doubt” by the fact that HMRC had to deregister 22,000 umbrella companies. ®
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[1] https://www.theregister.com/2021/05/21/amendments_to_finance_bill/
[2] https://www.theregister.com/2021/05/17/campaigns_umbrella_firms/
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2YK0fGsokag3TFcQjN-kVmQAAAII&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YK0fGsokag3TFcQjN-kVmQAAAII&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YK0fGsokag3TFcQjN-kVmQAAAII&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[6] https://www.theregister.com/2021/05/17/campaigns_umbrella_firms/
[7] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YK0fGsokag3TFcQjN-kVmQAAAII&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YK0fGsokag3TFcQjN-kVmQAAAII&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[9] https://whitepapers.theregister.com/
Re: Employment Agency Act 1973
The problems are those of policing and enforcing the regulations, by the time they get to the individuals, they are either gone or bankrupt or on a beach in the Phillipines.
Re: Employment Agency Act 1973
Under what act?
The issue is that umbrella firms are not currently regulated
Re: Employment Agency Act 1973
" The issue is that umbrella firms are not currently regulated "
The real issue is that contractors are forced to put themselves in the hands of a crowd of unscrupulous unregulated intermediaries that are actually skipping more tax unlawfully than the entire body of "personal service companies" ever avoided lawfully. There's actually no objective justification for umbrella companies to exist at all.
However HMRC don't care as this is politics, not revenue protection. Government doesn't like ordinary folk to exercise independence, so as far as HMRC is concerned the ideal is for everyone to be on a PAYE contract of service. Not only would this be "politically correct" but it simplifies the life of HMRC, who frequently seem to have difficulty even doing basic arithmetic.
The beeb did an excellent show on Radio 4 about this a little while ago.
It seems there are benefits, loopholes and exemptions on some charges for "smaller" companies.
Large organisations use an agency to get their large number of temp workers, eg for the Test and Trace and Vaccination programmes. Those agencies then sub it out to other agencies who than hire people but "employ" and pay them through 10's of 1000's of "micro companies" who are registered in the UK for a week or two before having a transfer of ownership to a director in the Philippines. These "directors" usually have no skills or qualifications other than to occasionally fill out official online forms and get a couple hundred quid a year (a lot over there) and may well be directors of multiple companies.
It's all technically legal and is costing the UK £billions in tax avoidance (Note, not evasion, that would be illegal)
The whole IR35 thing is a tiny part of this whole legal mess.
Employment Agency Act 1973
Surely it would be very simple to insist that all umbrella companies must be compliant under that act? That would solve the issues raised or at least problems where a company is actually registered in the UK.