The government has taken a significant step with new measures to enforce statutory due diligence within the umbrella companies market.
- A consultation was launched last summer to tackle tax non-compliance among umbrella companies.
- Susan Ball of RSM UK emphasizes the importance of these governmental interventions for the labor supply chain.
- Key elements concerning payroll tax debts and recruitment agencies remain unaddressed in the current announcement.
- Stakeholder engagement continues to ensure comprehensive implementation of the new due diligence regime.
In a pivotal move, the government has outlined comprehensive plans to confront non-compliance in the umbrella companies market through statutory due diligence. This announcement, part of today’s Tax Administration Day summary, marks a noteworthy advancement for the umbrella and agency sectors, along with organizations that engage them. Such legislative initiatives are anticipated to drastically reduce malpractice and enhance compliance across the labor supply chain.
Last summer, the government initiated a consultation aimed at curbing tax non-compliance in this sector. The consultation proposed a statutory requirement mandating end-clients or recruitment agencies to perform due diligence on umbrella companies. However, Susan Ball, an employment tax partner at RSM UK, noted that some aspects of this consultation were not addressed in today’s summary, leaving an element of uncertainty regarding their implementation.
Particularly, there was no mention of transferring payroll tax debt from non-compliant umbrella companies to the recruitment agency or end-client, or enforcing PAYE and NIC obligations on recruitment agencies supplying workers employed by umbrella firms. This omission leaves questions lingering about the future framework for such financial responsibilities.
Encouragingly, today’s statement did confirm sustained dialogue with the recruitment industry and other crucial stakeholders. This ongoing engagement aims to achieve a thorough understanding of how the newly proposed statutory due diligence regime will impact organizations utilizing umbrella companies.
For now, adhering to the HMRC guidance issued in December 2023 remains the recommended course of action. The guidelines on tackling non-compliance in the umbrella company market set the standard expectations and may serve as a precursor to forthcoming developments in this area.
The government’s statutory due diligence plans signal a critical effort to enhance regulation and minimize non-compliance within the umbrella company sector.
