Can Umbrella Payroll survive 2017

[jamesbrown]

Whether that support is an outright ban on umbrella's is an interesting question - I personally doubt it but it's possible...

I'm fully aware of those articles you posted, and what I'm arguing is that they won't (do anything drastic). Any legislation will be directed (or fail) because, unlike some backbenchers, HMG understands that compliant PAYE umbrellas are necessary. Anyway, legislating is much harder than you imply. Even if they intended such an approach, I can't envisage how a "ban" would be formulated or positioned in law. For example, the AWR would not have an appropriate scope to achieve that.

[lucyclarityumbrella]

May I refer you to https://www.theguardian.com/money/20...upply-teachers and https://www.nasuwt.org.uk/uploads/as...59191909b0.pdf - yes I know its supply teachers rather than construction but its the same logic that's going to be banned outright...

The frustrating thing on our part is that we have tried to engage with the unions to explain how umbrella companies operate but to no avail, they simply will not listen, then bad mouth the industry who have been operating in this way for 15 years without a problem until recent months.

A ban would be highly unlikely, if you think, as far as HMRC are concerned we are collecting the taxes on their behalf rather than them having to chase individual Ltd companies.

When HMRC removed the T&S for umbrella companies last year, we warned that there would be a shift to LTD, and that is exactly what we saw, more lower paid workers moving from umbrella to Ltd. The PS Legislation, was blatantly aimed to pull this back for what they describe as "disguised employees" the backlash, unfortunately, means that many contractors who shouldn't have been affected have now been caught too!

[madame SasGuru]

Umbrella companies were never designed for people on £9.00 per hour. They were to be used as an alternative to operating Ltd for contractors with niche skill sets that the end client did not have a need for on an ongoing basis.

£9.00 per hour, as an agency worker, should mean PAYE with the agency.

May I refer you to https://www.theguardian.com/money/20...upply-teachers and https://www.nasuwt.org.uk/uploads/as...59191909b0.pdf - yes I know its supply teachers rather than construction but its the same logic that's going to be banned outright...

While its all fair and good to say that teachers / builders on £700 a week shouldn't be using umbrella's the fact is that (as with everything else when it comes to Contracting) the umbrella company idea is being abused by less scrupulous agencies (and one very large sports retailer at a minimum). To stop those agency's performing those tricks a sledge hammer will be adopted to cure the problem (as I stated in my first post above).

The thing to remember is the final point of that post:-

WE are professional people who make business like decisions on whether to use a limited company or an umbrella. The people above are not professional business people and so as consumers (supported by major union pressure and support) there will be some protection for them when the Taylor review is finished. Whether that support is an outright ban on umbrella's is an interesting question - I personally doubt it but it's possible... And if the first approach doesn't work, longer term I wouldn't be surprised if there was a ban...

Oh and remember its the same bottom feeding agencies and "umbrellas" that mean contractors using Umbrella's don't receive expenses for second and subsequent engagements due to abuse similar to above..

[jamesbrown]

What impact will there by to umbrella's when agencies are legally forced to provide a zero cost payroll option?

That's my point about collateral, but there's no scenario in which they don't target any such legislation to low paid workers, I think. Afterall, legitimate PAYE umbrellas are doing everyone a service, and not everyone works through an agency. Putting something far-reaching in legislation w/r to agency responsibilities is more likely to eliminate them from the chain on high-paid contracts because no "free" payroll option is "free" (i.e. finders fee to agent, then client --> umbrella).

[lucyclarityumbrella]

I also suspect that the idea that an agency can advertise a role at £9 an hour and then deduct employers NI from the actual payment will be disallowed...

Umbrella companies were never designed for people on £9.00 per hour. They were to be used as an alternative to operating Ltd for contractors with niche skill sets that the end client did not have a need for on an ongoing basis.

£9.00 per hour, as an agency worker, should mean PAYE with the agency.

[madame SasGuru]

I think it depends on the particular category of umbrella. "Umbrella" is, ahem, an umbrella term. It's used for such a diverse range of businesses from fully compliant PAYE operators to dodgy scheme providers. Compliant PAYE operators are likely to see business increase with the PS changes. Dodgy umbrellas (particularly in the construction sector) are likely to face increased scrutiny. Whether, or the extent to which, some compliant models are caught in the crossfire is TBD (perhaps that's your point), but compliant PAYE umbrellas are ultimately delivering a service that HMG/HMRC would fully support.

I don't think Mark2009's point is about dodgy umbrellas in the way we perceive them (fronts for tax avoidance companies) - look at his first comment regarding people walking away as the advertised £700 a week is reduced by a £30 umbrella fee and 14% Employers NI... to £600 a week.

As you state umbrella is a umbrella term covering a lot of things. It also covers a lot of very different markets - the one that allows expensive (IT contractors) resources to work without tax issues and another one allowing Agencies to offload their payroll responsibilities and costs back to the "temporary employee".


Everyone here seems to be looking at the former group of umbrellas but its the latter group that Mark2009 is talking about and that is something the Taylor Report will be insisting on going - its a simple law change, doesn't impact HMRC's income stream and the unions are focussed on achieving it. So the question then is:-

What impact will there by to umbrella's when agencies are legally forced to provide a zero cost payroll option?

[jamesbrown]

I beg to differ.

I think it depends on the particular category of umbrella. "Umbrella" is, ahem, an umbrella term. It's used for such a diverse range of businesses from fully compliant PAYE operators to dodgy scheme providers. Compliant PAYE operators are likely to see business increase with the PS changes. Dodgy umbrellas (particularly in the construction sector) are likely to face increased scrutiny. Whether, or the extent to which, some compliant models are caught in the crossfire is TBD (perhaps that's your point), but compliant PAYE umbrellas are ultimately delivering a service that HMG/HMRC would fully support.

[Mark2009]

I beg to differ.

[madame SasGuru]

I strongly suspect that the Taylor review will insist on agencies providing a no cost payment system i.e. either run a payroll solution or offer a no fee umbrella option.

I also suspect that the idea that an agency can advertise a role at £9 an hour and then deduct employers NI from the actual payment will be disallowed...

How that impacts IT contractors is going to be curious but IT contracting is about the point you start to move away from consumer / worker regulations into business transactions so we are different....

[cojak]

Umbrella Companies are making people poorer I cannot see them surviving 2017, I am seeing young lads who are forced to use umbrella companies walking away from the construction Industry.
Employers are dodging NI and cutting basic rights by loading the responsibility on to workers, I also understand MP'S will be debating Umbrella Companies.

Thanks

Mark

No, umbrellas won't die - for many they are the only to work in the Public Sector.

Having to go PAYE is and employers dodging Employers NI is making life harder.

End clients dodging their total responsibilities is a different matter.

[Mark2009]

Umbrella Companies are making people poorer I cannot see them surviving 2017, I am seeing young lads who are forced to use umbrella companies walking away from the construction Industry.
Employers are dodging NI and cutting basic rights by loading the responsibility on to workers, I also understand MP'S will be debating Umbrella Companies.

Thanks

Mark