New consultation: Government consults on non-compliance in umbrella company market

The government describes an umbrella company as a business often used by recruitment agencies to pay temporary workers. In most cases, the umbrella company employs a worker and pays their wages through PAYE, while the recruitment company finds work for the employee from its clients, often on a short-term basis.

The consultation puts forward three options for discussion.

• To require due diligence by end-users using umbrella company workers. The government says it would set out applicable due diligence principles in guidance for businesses.
• To make another entity in the supply chain liable to pay any taxes – primarily income tax and National Insurance contributions (NICs) that should have been collected via Pay As You Earn (PAYE) - that cannot be collected from an umbrella company in the chain.
• For the employment business supplying the worker to the end user to be deemed to be the worker’s employer for tax purposes, so it would have to operate PAYE on payments to contingent workers. This would not prevent it from using a payroll bureau or umbrella company to discharge its PAYE obligations, but it would be ultimately responsible for the correct operation of PAYE overall.

The consultation closes on 29 August 2023.

Operative date

• Now

Recommendation

• Employers should check out the consultation on the GOV.UK website.