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Gaps in Budget over funding to regulate umbrellas ‘hugely disappointing’

Lack of clarity in Budget over funding to help regulate the umbrella sector concerns experts

Analysis of the Budget documentation, published after chancellor Rishi Sunak addressed the House of Commons, showed that the government is looking to clamp down on tax avoidance schemes.

It stated: “The government will legislate in the Finance Bill 2021-22 for further measures to clamp down on promoters of tax avoidance.”

The Budget document outlines four ways the Treasury is seeking to do this, one of which includes closing down companies and partnerships that promote such schemes.

Other options are allowing HMRC to freeze a “promoter’s assets” to ensure any penalties they are liable for are paid, deterring offshore promoters by introducing a penalty on UK entities that support them, and by sharing more information on promoters and their schemes with taxpayers to help them steer clear.

Autumn Budget and Spending Review ‘does not go far enough’

While the move to tackle non-compliant companies in the umbrella sector has been welcomed by many, some experts are saying the Autumn Budget and Spending Review does not go far enough.

Rebecca Seeley-Harris, chair of employment status forum and former adviser to the Treasury, and James Poyser, CEO of inniAccounts, highlighted that there is no mention of any funding to help regulate this sector.

During the spending review submission process, the pair recommended funding for a Single Enforcement Body (SEB). 

As part of their discussions with the Department of Business, Energy and Industrial Strategy (BEIS), this body would regulate umbrella companies. But in order for it to be set up, it needs government funding.

Without funding, sector will remain unregulated

Harris and Poyser also noted that there was no mention of whether existing bodies such as the Employment Standards Authority would get additional funding in lieu – another recommendation they made.

Harris said: “I am hugely disappointed if the government has not seen fit to give funding to this much need enforcement body.  Without this funding umbrella company workers will continue without any official protection in an unregulated market.”

She added that there is hope as the new inquiry into off-payroll rules in the private sector, led by the House of Lords Finance Bill Sub-Committee, assumes that SEB will get funding, but without formal confirmation, it’s impossible to plan for the policy going ahead.

Clarke Bowles, director of strategic sales at Parasol Group, echoed Harris and Seeley’s concerns saying “once again contractors have slipped through the cracks.”

He said: “Although it was not unexpected, it was a disappointment for the UK contractor community that little was announced by way of support in last week’s Autumn Budget announcement.

Government urged to take ‘reformative action’

“[…] One announcement that went slightly under the radar from the government actually came earlier this month with a 1,300-word document titled, Check how to reduce your risk of using an umbrella company who operates a tax avoidance scheme

“This, combined with a vague promise from the chancellor that the government would be clamping down on tax avoidance, does little to reassure contractors that they will receive ample protection and support.”

Bowles added: “Despite a number of positive moves to improve regulation, it remains crucial for the government to step in and take reformative action.

“With many of the self-employed opting to go umbrella thanks to the increased level of protection it offers them – particularly in light of the difficulties caused by the Covid-19 pandemic – it’s vital that these people know they are working for compliant, trusted companies who will not take advantage of their position.”

By Contractor Weekly

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4 thoughts on “Gaps in Budget over funding to regulate umbrellas ‘hugely disappointing’”

  1. Gary Andrews

    More lies (let’s call it what it is). Government and HMRC have had enough powers to clamp down on dodgy promoters for decades. They simply choose not to.

    Instead they take “donations” from promoters and lobby groups in return for diverting revenue attention to powerless end users.

    If this were the drugs trade it would be equivalent to kingpins throwing the law some expendable users and a case full of cash every so often.

  2. Andrew Harrison

    I take some (probably undeserved) comfort from:
    “clamp down on promoters of tax avoidance”
    Specifically this is not the contractors who listen to their advice and potentially end up with a massive bill years later.
    This sounds as if it is aimed by those who advertise an increased payout, cream off a percentage and then leave someone else with the risk. Here’s hoping.

    The maxim about “if it looks too good to be true it probably is too good to be true” should still be part of everyone’s thought patterns.

    • Paul

      I disagree, ‘if it looks too good to be true it probably is’, a meaningless behavioural insights phrase like ‘our view of the law’.
      It can be made to mean anything and nothing. Ask yourself how it would help you decide your IR35 status or anything else tax related.
      The sector needs hard rules not proverbs.

    • Chris

      It’s just not true, HMRC have not, and are not clamping down on promoters.
      Promoters that belong and donate to the Conservative party.
      Where there’s corruption there’s always a victim, again it’s the small contractor.

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