[18/3/2015 Update – The Chancellor announced a restriction on travel and subsistence payments to umbrella workers from April 2016 following a consultation period. It is hoped the measure will create a level playing field within the employment services industry. Read this article for more details.]
In his Autumn Statement speech, the Chancellor announced a number of new measures which may result in further action being taken against unethical umbrella providers in 2015. Industry figures give their reaction.
What did the Chancellor say about umbrella companies?
In the tax-avoidance part of the speech itself, George Osborne said that the Government was consulting on measures “including the use of so called ‘umbrella companies’ to deprive people of basic employment rights like the minimum wage and avoid tax.”
In the official documentation, further action is also planned to tackle the use of ‘overarching contracts’ by some umbrella schemes to further exploit expenses rules:
2.147 Overarching contracts of employment and temporary workers
The government will review the increasing use of overarching contracts of employment by employment intermediaries such as ‘umbrella companies’. These arrangements enable workers to obtain tax relief for home to work travel that would not ordinarily be available. The government will publish a discussion paper shortly to inform possible action at Budget 2015.
So, what does this mean for the umbrella company industry? We asked a number of industry experts to comment.
Anti-umbrella rhetoric could unfairly tarnish professional service providers
The UK’s leading umbrella firm, Parasol, welcomed the review. The firm’s CEO, Rob Crossland, said this could signal a “breakthrough” for professional umbrella firms:
“Any umbrella company that fails to offer genuine employment rights or pay the minimum wage deserves to be placed under the spotlight. Such practices are unacceptable – they do a disservice to workers, our sector and the UK economy as a whole.”
Like many other industry figures, Crossland is concerned that broad negative statements about ‘umbrella companies’ are not helpful to ethical service providers, but “the forthcoming review offers the ideal opportunity to address any such misconceptions.”
The Freelancer and Contractor Services Association (FCSA), which represents many of the UK’s biggest umbrella firms, clearly welcomes the chance to banish unethical umbrella practices, but also echoes Crossland’s concerns:
“As a trade body, we have become increasingly concerned regarding recent media reports that unfairly tarnish our sector. Compliant umbrella businesses are important and valuable – it is not the umbrella ‘way of working’ that it is wrong, it is the non-compliance of some umbrella employers that is wrong.”
Another trade association, IPSE, warned than any broad measures aimed to clampdown on unethical business practices should be carefully thought-out.
Andy Chamberlain, IPSE’s Senior Public Affairs Manager, hopes the Chancellor “ensures that any changes to umbrella companies provide real benefits to those using these structures and do not inadvertently affect the genuinely self-employed.”
Salary sacrifice measures
Alongside the measures mentioned above, the Government also plans to ‘stop tax relief from being claimed on reimbursed business expenses when they are paid in conjunction with a salary sacrifice scheme.’
Lisa Keeble from All Umbrella Companies Are Equal said that this measure “follows pressure from the Unions Unite and UCATT who have been campaigning against umbrella companies following the introduction of the Onshore Intermediaries Legislation which addresses the issue of false self-employment.”
Construction firms, ever eager to cut their Employers’ National Insurance bills, have encouraged the practice, but the spotlight remains firmly on the umbrella companies themselves, rather than the hirers.
Commenting on the Autumn Statement umbrella measures as a whole, Keeble said: “It will be a case of ‘watch this space’ to see what develops from the consultation but the hope is that the result will reflect the desires of the industry to create a level playing field [for umbrella companies].”