Reply to: Tackling Non Compliance in the Umbrella Market Help needed

[eek]

Problem is, all of the agenices i have spoken to are only open to offering auto enrolment, so SIPP salary sacrifice could be a no no under agency PAYE.

Yep but the agency would have no choice but to advertise PAYE rates which would make your typical contract rate very unappealing.

However if HMRC was clueful they would be doing the exact opposite of the current approach - creating a market of x00 regulated umbrella firms who are watched closely and insisting that agency workers get paid via one of those organisations.

That would solve a whole heap of problems beyond just our world that unions and MPs know all about but prefer to sweep into the too difficult pile.

[lucyclarityumbrella]

I agree and I am not targeting Clarity or Lucy with my comments.

It would take more that that to offend me

On another note, I think a lot of these measures will be in tandem with outside ir35 being banned. Some recent HMRC wins and setting precedent suggests there is only one way this is all going unfortunately.

From conversations, I cannot see how they will implement it in practice, aside from anything else there is a legal requirement for them to give software providers adequate time to accommodate the amends, and if they provide actuals by October that will only give 6 months to implement, so I think there may be a case for delay from a technical perspective!

[agentzero]

I agree and I am not targeting Clarity or Lucy with my comments. From the worker's perspective the umbrella company does the same thing, with nuances between them purely due to the operating decision of the umbrella company. People just want paid and the option to do all those PAYE things PAYE earners do: pay student loan repayments, contribute to a pension with a few niches in some cases.

I don't see an inside ir35 worker as a contractor: no expenses at all or as good as none, similar day rate to outside ir35 but none of the benefits otherwise. If you're going to be out of work sometimes and have the associated risk, inside ir35 is better forced down a PAYE route.

On another note, I think a lot of these measures will be in tandem with outside ir35 being banned. Some recent HMRC wins and setting precedent suggests there is only one way this is all going unfortunately.

[jamesbrown]

Problem is, all of the agenices i have spoken to are only open to offering auto enrolment, so SIPP salary sacrifice could be a no no under agency PAYE.

As you will have noticed in recent press reports, that is a target for elimination or rendering less generous, so the main practical benefit of umbrella employment would then fall away.

Putting aside the way this has arisen and is likely to be implemented, which is unsurprisingly flawed, the market should be better without umbrellas - the fewer intermediaries the better. There are, of course, some excellent umbrellas around, including your own, that have worked hard to provide an excellent service in the context created by gov't, but the context sucks and there is really no good reason for umbrella companies to exist. They always had a shelf life because they are a product of a peculiar set of circumstances that are sensitive to gov't intervention.

[lucyclarityumbrella]

Even worse when HMRC pull out the MSC Legislation again looking at PSC's!

[Protagoras]

Problem is, all of the agenices i have spoken to are only open to offering auto enrolment, so SIPP salary sacrifice could be a no no under agency PAYE.

Quite. And this makes assignments not 'outside' even more unattractive.

Government's approach to tacking non-compliance seems to be to discourage people from working ...

[lucyclarityumbrella]

Unless I hear a good reason, which I haven't so far, I am pro getting rid of umbrellas for inside ir35 contracts and switching to PAYE with pension salary sacrifice of an amount the worker chooses.

Problem is, all of the agenices i have spoken to are only open to offering auto enrolment, so SIPP salary sacrifice could be a no no under agency PAYE.

[Protagoras]

An inside ir35 contract is called a contract in the way that a permanent job contract has a contract. Neither mean the person is a contractor. You're considered a temporary resource on an inside ir35 contract and in the current bad jobs market there are very few upsides.

Umbrella companies, agents and clients continue to describe temps as 'contractors'. Contractors take commercial risk; I can't imagine a temp undertaking work to rectify defects at the temp's own cost as would a contractor.

I think people would welcome the simplest method for being paid as possible while maintaining salary sacrifice pension contributions.

This assumes that tax-free salary sacrifice arrangements remain available; there is a risk that this won't be the case.

Unless I hear a good reason, which I haven't so far, I am pro getting rid of umbrellas for inside ir35 contracts and switching to PAYE with pension salary sacrifice of an amount the worker chooses. Sorry, but umbrellas are a failure. Tell a worker their umbrella has issues and they reveal they didn't know how to choose which umbrella to choose between. There is no regulation and all the risk is taken on by the worker, formerly called contractor.

An umbrella company can provide employment for workers inside, outside and not-assessed for off-payroll.

Personally, I had confidence that my umbrella company could pay tax properly and the umbrella company was able to pay into my chosen pension, offering flexibility beyond what an agent could provide. My gripes - such as that the umbrella company would not pay for training from gross as would be the case for a proper employee - are not the fault of the umbrella company.

I don't believe that umbrella companies should need to exist; the reality is that they do owing to government discrimination against contractors. There are many umbrella companies around that do a great job.

[agentzero]

The thing I don't get here is that no matter how dodgy umbrella firms are at least they minimised the scale of the market HMRC need to watch to 600 or so companies instead of 20,000 employment agencies many of whom already play tax avoidance games to keep their costs unfairly lower to other agencies. And the umbrella industry is getting itself organised between SafeRec and VeriPaye end clients and agencies can be sure workers are being paid correctly with all tax paid..

What is ironic here - is that the new scheme simply won't work and we will be back here in 2 years as HMRC desperately tries to shift the responsibility on to the end client.

I think some perspective from the worker is welcome. From what I have heard from friends it is difficult to find an umbrella company when offered an inside ir35 contract. The agency will inevitably send a list of preferred umbrellas, which they often receive under or over the table money from. If you ask to use your own preferred umbrella they will often accept that, showing the sham that the preferred umbrella list is.

An inside ir35 contract is called a contract in the way that a permanent job contract has a contract. Neither mean the person is a contractor. You're considered a temporary resource on an inside ir35 contract and in the current bad jobs market there are very few upsides.

I think people would welcome the simplest method for being paid as possible while maintaining salary sacrifice pension contributions. The current situation where people have to choose from a list of umbrellas, some low quality and dodgy but with no real way of the worker knowing this 100% is unacceptable and can't continue. A good umbrella can go bad quickly.

Unless I hear a good reason, which I haven't so far, I am pro getting rid of umbrellas for inside ir35 contracts and switching to PAYE with pension salary sacrifice of an amount the worker chooses. Sorry, but umbrellas are a failure. Tell a worker their umbrella has issues and they reveal they didn't know how to choose which umbrella to choose between. There is no regulation and all the risk is taken on by the worker, formerly called contractor.

A contractor and contracting is outside ir35 only. The above is inside ir35 and might as well be PAYE.

[lucyclarityumbrella]

Lots of conversations going on at the moment with Government, details due around June/July time, until that we are really in the dark. Discussions that are happening are relatively positive to the "issues" the proposals could cause - so watch this space and I will update you when I can.

[eek]

https://www.contractoruk.com/news/00...ompliance_plan

It says “Workers’ overarching contracts of employment with umbrella companies will need to be changed to contracts of employment or contracts for service”.

What does this mean? Does it mean that that a worker on an umbrella company employment contract would be terminated and offered a new contract for service by an Agency, leaving Umbrella companies to close down?

Problem is no one has a f***ing clue and HMRC devs won't have time to make the changes required let alone other people involved.

Reality is the plan is stupid created by a couple of people who don't understand how the industry works and refuse to listen.

As for Mark Tindal - the problem isn't umbrella agencies it's agencies who have lied through their teeth by advertising an illegal item called umbrella rate.

If you are inside IR35 the rate advertised should be PAYE - and anything that isn't PAYE should be subject to an advertising standards complaint until the ASA/HMRC gets the arse in gear and tells agencies what the rate needs to be.

If HMRC/ any government had 2 brain cells to rub together - the fix would be telling agencies that the rate advertised should be the amount on the payslip so 35 hours at £x an hour is 35x in the gross pay field of the payslip. Anything else is an illegal deduction of wages and will be treated as such by an employment tribunal.

[Protagoras]

https://www.contractoruk.com/news/00...ompliance_plan

It says “Workers’ overarching contracts of employment with umbrella companies will need to be changed to contracts of employment or contracts for service”.

What does this mean? Does it mean that that a worker on an umbrella company employment contract would be terminated and offered a new contract for service by an Agency, leaving Umbrella companies to close down?

[lucyclarityumbrella]

The rationale, is that there were two cases whereby HMRC have not been able to go after the recruiter for unpaid employment taxes, so they think that by doing this is will allow HMRC to recoup this rather than trying to do debt transfer which they have failed with in the past!

[ladymuck]

I can't imagine many people wanting to have separate "employers" for tax and benefits purposes while paying for the 'privilege' - especially considering the value of 'benefits'.

It looks as if the perceived non-compliance resolution effectively means making umbrella companies obsolete.

It was all so much easier when we could run our own companies and professional accountants ensured that small LtdCos paid the due tax.
Interestingly, IPSE found in The IR35 Spotlight 2025 that "almost seven in 10 of those that are currently retired (69%) reported that they would be open to return to the labour market".

I expect measures to tackle perceived umbrella company non-compliance will only result in reduced labour market participation, but of course it won't be measured and reported as such.

That's actually an interesting angle to raise with your MP. This proposal isn't going to encourage people to return to the workplace. Why would anyone want two employers for different functions? What is the rationale behind that?

[Protagoras]

Yeah, this whole thing feels like a mess. Instead of properly regulating umbrella companies, they’re just shifting the tax liability onto recruiters, which doesn’t actually solve the issue. If anything, it could create more loopholes and confusion, not to mention the headaches for workers dealing with multiple "employers" for tax and benefits.

I can't imagine many people wanting to have separate "employers" for tax and benefits purposes while paying for the 'privilege' - especially considering the value of 'benefits'.

It looks as if the perceived non-compliance resolution effectively means making umbrella companies obsolete.

It was all so much easier when we could run our own companies and professional accountants ensured that small LtdCos paid the due tax.
Interestingly, IPSE found in The IR35 Spotlight 2025 that "almost seven in 10 of those that are currently retired (69%) reported that they would be open to return to the labour market".

I expect measures to tackle perceived umbrella company non-compliance will only result in reduced labour market participation, but of course it won't be measured and reported as such.