Should umbrella companies be regulated by the FCA?

[lucyclarityumbrella]

There is however no appetite with the umbrellas or those accrediting them, to have a standard template that they can all use and which allows direct comparisons. I'm not holding my breath that we will ever achieve that either.

Completely agree, a standard template would work in everyone's interests; HMRC, the contractors and the umbrella (cutting legal costs, setting very clear guidelines etc) but HMRC would need to agree it and there is no likelihood of that happening anytime soon! The it is down for the umbrella company to make their USP based on service alone which is what it should have been all along!

[webberg]

OK. I've not had the opportunity (and I'm not sure I want it) of auditing payslips from a range of umbrellas and for the moment at least I'm prepared to accept that greater knowledge you have in this area.

We are I think seeing rogue umbrellas being pushed more and more to the fringes.

Those who offer absurdly high take home rates through some form of reclassifying income as something else (usually a loan) are now being called out more often. This is however being done by individuals and advisers and NOT - for reasons I do not understand - by all those organisations in this space who claim some form of accreditation.

There is understandably some trepidation about naming and shaming because this comes with a risk of being sued.

However, HMRC is the great conundrum here. They will name and shame an individual who owes £25k in tax, but will not do the same for a dodgy umbrella who could happily walk away with many times that amount. Why not?

We do see a lot of what I would describe as sharp practice.

We see gross daily rates being divided into pay, expenses, participation in reward/discount schemes, pension contributions, etc often without any rhyme or reason. I suspect that conversations with those who believe the rate an umbrella quotes and the reality in their first pay check are "interesting".

Whilst I understand that every umbrella wants a competitive advantage over the others, achieving this via slight of hand or dodgy arithmetic is surely to heaven a short sighted strategy?

There is however no appetite with the umbrellas or those accrediting them, to have a standard template that they can all use and which allows direct comparisons. I'm not holding my breath that we will ever achieve that either.

[cwcsolutions]

My definition of all is the standard definition and the statement was actually in the past tense.

And I agree, any umbrella company which has passed the FCSA accreditation process is more than likely adhering to PAYE regulations.

Of course, it’s always been about interpretation, but for example, I don’t think it should have taken a change in legislation to stop umbrella companies from treating part of a workers’ remuneration as expenses, especially if that treatment knocked pay below the NMW, and/or the NI threshold, in order to reduce or negate the employer contribution.

Can you imagine how many people are still unaware that, due to the fancy footwork adopted by the umbrella companies which paid them in the past, now have reduced entitlement to state retirement pension? It makes my blood boil.

I’ve audited payslips from every well known and unknown umbrella company, in the past, and found them lacking, some even after rule changes.

[cojak]

But..an umbrella company is not much more than a payroll company and need not demonstrate tax expertise on the same level as an accountant or other tax advisor. Having payroll experts on board, i.e. members of CIPP, would be sufficient to ensure that the relevant tax provisions were observed when paying workers, but that has never been the case with any umbrella company, all of which have breached PAYE regulations over the years.

All? I would challenge that statement as well.

What is you're definition of 'all'? There are umbrella companies who do follow the PAYE regulation and pass the correct amount of tax to HMRC*, and do not breach the rules.

Any umbrella with FCSA Accreditation will be OK.

(*I can see some dodgy characters paying out 65% to contractors and keeping it all, but that's straight out criminal fraud).

[webberg]

But..an umbrella company is not much more than a payroll company and need not demonstrate tax expertise on the same level as an accountant or other tax advisor. Having payroll experts on board, i.e. members of CIPP, would be sufficient to ensure that the relevant tax provisions were observed when paying workers, but that has never been the case with any umbrella company, all of which have breached PAYE regulations over the years.

I've added the emphasis.

That is a bold statement.

Given that PAYE is ruled by regulations which are not primary legislation, they permit a much wider interpretation and whilst we have seen some sharp practice and outright fraud, accusing all of them of breaches rules is brave?

[cwcsolutions]

For me, there are different kinds of tax advisor, ones who read the legislation and offer guidance, and others who read the guidance and offer ways they think a scheme will avoid the legislation. They’re both using the same skills and knowledge, but it’s the interpretation that’s askew.

Take the overarching contract which supposedly converted temporary workplaces into permanent ones for T&S purposes. A contrived clause in a contract of employment wasn’t in ‘the spirit of PAYE regulations’ because there had to be an intention to form an overarching contract with an employee, for the rules on temporary workplaces to not apply, and in reality, only a minimal number of companies had that intention. This was why it warned against for years and then was tackled out of existence. HMRC wasn’t against workers getting tax relief on work related expenses, but the claim to relief had to be properly attained.

But..an umbrella company is not much more than a payroll company and need not demonstrate tax expertise on the same level as an accountant or other tax advisor. Having payroll experts on board, i.e. members of CIPP, would be sufficient to ensure that the relevant tax provisions were observed when paying workers, but that has never been the case with any umbrella company, all of which have breached PAYE regulations over the years.

[webberg]

FCA is not the best regulator on the planet.

Indeed all the state regulators could do with some common shared basics, like independent complaints process, impartiality rules, random peer review from people outside that geography or particular business, public visibility of which person agreed to which judgement, and so on

Apart from that regulating umbrellas would be good. But would also be best if the politicians decided which legal frameworks they want to support genuine freelancers, as they take a pop at all the current ones.

I agree with much of the above, but in a world in which the authorities are either struggling for resources (financial, intellectual, talent) or just cannot keep up, choice is limited.

We also need to be wary of the "assumed authority" eagerly grabbed by certain bodies.

I'll use the example of my own professional body, The Chartered Institute of Taxation. It is relatively small - around 17k total members, perhaps 80% active. In order to join you need to have completed a series of exams and demonstrated some experience in the tax sector. Once you join you pay an annual fee and are required to submit evidence that you have kept up to date. You can also choose to use them for money laundering services etc. There is a code of practice and disciplinary processes for breaches.

Those of us who are members, value the organisation and submit to the oversight of the body because we know that they are maintaining standards.

(There are a few who have a more cynical approach, seeing the badge as a means to entice business and who are prepared to cut a few corners knowing that audit is infrequent).

You do not need to be a member of the CIOT in order to claim that you are a tax adviser.

Many who advertise as "qualified" tax advisers are not members.

Some are members of organisations who do have some form of process to admit members - the ICAEW for example - where tax is part of a wider spectrum of skills.

Some who claim to be "tax advisers" have no professional qualifications at all. For example, we employ ex HMRC officers. They have been through the tax training process in that body which, although not as good now as it was even 10 years ago, still renders a base level of knowledge. However once they have left, there is no audit of their skills or practices and they are free to make as many claims as to expertise as long established members of the above bodies - or indeed somebody who wakes up one morning and decides they are tax experts.

There is however a perception in the general population that somebody claiming to be a tax expert has had some training and is regulated. This is unfortunately not the case. The victims of this assumed authority are individuals (in this case contractors) who may get bad advice.

[CoolCat]

FCA is not the best regulator on the planet.

Indeed all the state regulators could do with some common shared basics, like independent complaints process, impartiality rules, random peer review from people outside that geography or particular business, public visibility of which person agreed to which judgement, and so on

Apart from that regulating umbrellas would be good. But would also be best if the politicians decided which legal frameworks they want to support genuine freelancers, as they take a pop at all the current ones.

[webberg]

Depends

On what?

[northernladuk]

Depends

[BrilloPad]

Could you add a poll? Try under thread tools.

A witty AndyW 3rd option would be nice - but as its professional not necessary.....

[webberg]

Yes or no?