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Published on 25 August 2023

Tackling non-compliance in the umbrella company market


LITRG have responded to this consultation, the objectives of which are to deliver improved outcomes for workers, to support a level playing field in the umbrella company market, and to protect taxpayers from the significant revenue losses that currently arise from non-compliance.

Two folders on a desk, one says 'POLICIES' and the other says 'PROCEDURES' on the side of the folders.

The consultation contains strong options for tackling tax non-compliance that should hopefully go a long way towards addressing our longstanding and serious worries about disguised remuneration (DR). We note that options one and two (mandatory due diligence and debt transfer), while allowing good umbrella companies to subsist, would significantly reduce the chances of non-compliant umbrella companies entering labour supply chains in the first place, protecting workers from getting caught up in DR. We do not think option three is viable.

For both options one and two, HMRC will need to use, and be seen to use, any new powers in order for them to have the desired effect and we take the opportunity in our response to highlight some practical implications of the options which we hope will help HMRC shape the best, most workable, policy proposals possible.

We have made a few comments on the regulation chapter and the mini umbrella company chapter for instance that if Key Information Documents (KIDs) were fulfilling the role that was intended, the need for regulation would be slightly less urgent; and that any changes to the Flat Rate VAT scheme in an attempt to tackle mini umbrella company abuse need to be properly consulted on.

It is important that once the consultation closes, decisions are made and implemented as soon as possible. In the meantime, we would urge HMRC to consider what more they can do to improve outcomes for workers and put forward some ideas in terms of better linking guidance, aligning the tone in communications and publishing a compliance strategy for DR to reduce the confusion, fear and speculation over what might happen when a worker finds themselves in DR.

Our consultation response can be seen here.

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