The jury is still out as to whether the Spring Budget will include an announcement on what the government will do next to crack down on unlicensed or non-compliant umbrella companies. But according to Osborne Clarke Workforce Solutions, something is brewing.
“It is looking likely that something is coming and we can expect, at the very least, the government’s response to the consultation which may set out the direction of travel or more detailed plans,” says an Osborne Clarke Workforce Solutions Insights report: Spring Budget 2023 preview | Will there be an announcement about UK regulation of umbrella companies?
“There is a strategy from government and HMRC to enforce compliance in off-payroll staffing supply chains,” says the report.
These strategies could likely include:
- IR35 reform
- The dusting off and application of the agency and MSC legislation
- Rrenewed focus on CFA compliance in HMRC’s “Business Risk Review” Plus process for large corporates
- Umbrella non-compliance will at some stage be addressed at a structural rather than individual enforcement level
Osborne Clarke’s Workforce Solutions team suggests that as long as the government keeps the definition of an umbrella company “narrowly defined, creative operators of various unlawful schemes will find loopholes.”
The team believes that to eradicate loopholes the government should perhaps consider a wide definition that includes any organisation that “seconds workers to work for third parties” then that would “potentially capture a wide range of consultancy businesses (including law firms) and many government departments, as well as traditional staffing businesses and so-called employers of record (EORs).”
If not this government, the next one?
The report says that even if “nothing very meaningful” is introduced this year, it seems likely that “any new government in the next two years will look to take action in this area.”
However, if an effective regime is introduced, covering tax compliance as well as other issues, then Osborne Clarke sees “dodgy umbrellas” disappearing.
“This may be wishful thinking”, say the legal experts, “they do have a knack of “phoenixing” and there may be a surge in even more questionable offshore schemes as a result of new legislation, with use of devices like cryptocurrency to try to evade tax.”
However, the report states that aggressive tax schemes via umbrellas may become a lot less common in many sub-sectors.
Click here to read the full report.
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