Umbrella companies – have your say

Umbrella companies are unregulated and there is a wide spectrum of operators. Our 150-page report, published in March 2021, included a detailed look at how umbrella companies operate. We found a lot of good practice, but our report also highlighted several concerns.

As set out in our press release welcoming this publication, this call for evidence is a significant step forward in terms of the government beginning to address these concerns.

The call for evidence

The call for evidence invites views from stakeholders on the role that umbrella companies play in the labour market, and how they interact with the tax and employment rights systems. It sets out the concerns that have been raised by some stakeholders, as well as government action already taken to tackle tax non-compliance and improve protection for workers

The call for evidence specially asks for input from workers, particularly for their views on the government’s understanding of umbrella company behaviours that are causing concern.

If you have experience of any concerning behaviours and want to help shape what happens in the future with umbrella companies, we would urge you to take this opportunity to tell the government. Perhaps understandably, the authorities can be reluctant to take up issues when organisations such as ours make general points – it is therefore very important that they hear first-hand evidence from workers about their experiences with umbrella companies.

How can I input?

A ‘call for evidence’ means that you are able to share your personal views and experiences of working through an umbrella company.

If you would like to help make a difference, but don’t really know how to respond or have never done anything like this before – don’t worry. Here are some tips to help you:

• The call for evidence contains 38 questions. You are not expected to answer all of them or even any of them – it is fine to just send in something free style if you want!
• You will need to make your submission, in writing, by 11.45pm on 22 February 2022.
• You should email it to [email protected]
• There is no right or wrong format, however it is helpful to number your paragraphs 1, 2, 3 and so on.
• Just saying things naturally, in your own words, can be very powerful
• Often a short and concise response is most useful. If it is any longer than, say, a few pages, you should include a summary of your main points at the beginning
• If you want to include evidence, statistics, or data to support your points, then provide a link to where the full information can be found
• Make it clear who the response is from and your reasons for submitting a response – for example, an individual who has been positively or negatively affected by working through an umbrella company
• If you have any recommendations (or changes that you would like to see happen) that you would like the government to consider, then do feel free to include them, although it goes without saying that they are not obliged to accept them!
• Please note that the review team will publish names of those who send in written evidence. If you do not wish your name to published, you must say so and explain your reasons why.
• If you would prefer to, you can complete a simple worker survey, which is an alternative way of sharing feedback if you don’t want to work through the call for evidence document.

How else can I have my say?

HMRC want to ensure they hear a range of views about umbrella companies, including from workers from all walks of life. They also want to make the call for evidence process inclusive and accessible to all. 

As such, if you don’t want to write in, but still want your voice to be heard, you can join a small group video call with some other workers and HMRC staff members (who will take notes) and tell HMRC about your experiences of working through an umbrella company. HMRC would like to hold a specific call for lower income, unrepresented workers, probably in the week of 24 January 2022.

To take part in this call, you do not have to provide any details about yourself and can even keep your video off if you want. If your involvement with umbrella companies means that you may not have paid enough tax, HMRC want to reassure you that they are not interested in this – they just want to hear from as many workers as possible.

You do not need to travel anywhere for these sessions but you will need your own internet connection, computer, phone, or tablet.

If you are on a lower income and would like to get involved, please contact us by 14 January 2022, and let us know and we will pass these details on to HMRC. You will then be contacted with a date/time and a link to join the session.

What happens in the meantime?

Any changes to the umbrella company market that come out of the call for evidence may not take effect for a long time. As such, it is hugely important that workers try and steer clear of problems with umbrella companies that may occur in the meantime.

For example, one of the biggest issues is that some non-compliant umbrellas can use disguised remuneration to pay workers. This may not be with the worker’s agreement. In fact, as the worker’s net pay is often roughly the same or only slightly increased, it can be totally invisible to the worker. We set out the problem in more detail and what to do if you think you are in a disguised remuneration scheme in a previous article.

GOV.UK have two new pages of guidance to help you check whether you may be caught up in disguised remuneration – a risk checker and a payslip checker.

You may notice that HMRC’s guidance suggests that it is you that could end up having to pay money to HMRC.

What underlies a disguised remuneration scheme is a failure to operate PAYE correctly on behalf of the umbrella company employer. The PAYE regulations say that in most instances, HMRC should pursue the employer for any underpayment (HMRC have discretionary powers to disapply the PAYE regulations, but we do not think they would apply in situations like this).

If HMRC take that action against the employer, our understanding is that in most cases, the employer will then have a right of action against the employee which – if successful – will end up with the employee being in the same position as if the correct deductions had been made in the first place. We do not think it is for HMRC to make a shortcut straight to the employee – the PAYE regulations must be applied and then it is up to the employer to take any action against the employee that they see fit.

Please note that if HMRC ask you to ask you to pay back any money as a consequence of being in a disguised remuneration scheme, we suggest you seek some professional advice before doing anything. Take advice from a professional tax adviser – or if you can't afford one, TaxAid.