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Umbrella Regulation Update

Umbrella Regulation Update

Adrian Marlowe

Adrian Marlowe

umbrella regulation update

Regulation of the umbrella market was the subject of a joint consultation by HMRC, HM Treasury and DBT in the summer of 2023. The consultation closed back in August 2023, but with a general election looming, what is the current state of play?

The consultation focussed primarily on two key areas.  Firstly, how an umbrella company should be defined, the models that should be covered, and the form regulations should take. Secondly, the responsibilities within the supply chain. This includes implementing mandatory due diligence, transferring umbrella tax debts to others in the supply chain, or holding those higher in the supply chain accountable for taxation.

The Spring Budget in March 2024, announced that “the government will provide an update on the progress of its work to tackle non-compliance in the umbrella company market shortly.” This was indicated as being on the next tax administration day, which was the 18th April 2024. However, on this day, the announcement was “The government remains concerned about the scale of non-compliance in the umbrella company market…and will publish a response to its consultation in due course.” The latest announcement indicated that new guidance will be published and “The government is minded to introduce a due diligence requirement to drive out bad actors from labour supply chains.”

That full response has yet to be published and is now unlikely to be until after the July election. There has, however, been cross-party support to tackle this area, so there is no reason to think that an election will derail the overall plan. There have been other recent developments, and recruitment businesses can take steps now to protect their position.

We recently reported on a decision on mini umbrellas. This should serve as a strong warning to anyone engaging with mini-umbrella models within their supply chain. The government has also published Spotlight 64. This focuses on the risks for agencies of engaging with non-compliant umbrellas.

What steps can you take now?

All the guidance points to due diligence, setting expectations and verifying that those expectations are met, with liability if they are not. In essence, you need a good contract, backed up by guarantees.   An umbrella should offer comfort that it is not operating or involved with mini umbrellas, that payments are being treated as employment income (unless permitted CIS), and that the umbrella is paying workers correctly, affording the workers their rights and paying the taxes, so not exposing you to risk of a claim or liability.  Lawspeed has been providing specifically designed umbrella framework agreements for many years. These are supported by the inclusion of a directors guarantee – something recommended by government guidance.  We also provide accompanying work-finding terms for use with the individual operating via the umbrella. This provides you with added commercial protection and establishes compliance with the Conduct Regulations. 

Get in touch today! Find out how our contracts and terms of business can set you up for success and receive rapid advice on this or any other employment or recruitment-related topic on 01273 236 236 or email [email protected].

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