back to article UK.gov's new single enforcement body does not cover rogue umbrella companies, contractor campaigners complain

UK government proposals to create a workers' watchdog have been slammed by campaigners for not adequately covering umbrella companies, some of which have been accused of sharp practices as the IR35 off-payroll tax revamp expands their usage among contractors. This week the Department for Business, Energy and Industrial …

  1. tip pc Silver badge

    complaining that something just announced hasn't launched yet!!

    "Firstly, BEIS has set out no timetable for creating the single enforcement body, leaving workers grossly exposed,"

    From that analogy, as it doesn't exist then workers have always been grossly exposed.

    did something change that makes people more exposed now than at any time before?

    1. sabroni Silver badge

      Re: did something change that makes people more exposed now than at any time before?

      Yeah, IR35 came in, then loads of umbrella companies sprang up to fleece contractors who were trying to comply with the law.

      These new companies wouldn't have lasted five minutes before IR35, everyone was working for themselves for a salary of £10,000 on a business with a turnover of £250,000 (with appropriate profit related dividends to the single director at the end of year of course). Why be an employee of an umbrella when you can be a director of a thriving business?

      Why the government wanted to put a stop to that I can't fathom, sounds about as Tory as you can get.

      1. tip pc Silver badge

        Re: did something change that makes people more exposed now than at any time before?

        "Yeah, IR35 came in,"

        this new thing isn't just about IR35 & Umbrella companies though, it doesn't specifically mention umbrella companies which is yet another gripe being made.

      2. Waspy
        Boffin

        Re: did something change that makes people more exposed now than at any time before?

        IR35 hasn't 'just come in', it's been around over 20 years. Not that many contractors or businesses ever realised this. HMRC just keep piling on more tweaks to an unworkable nonsensical regulation and create untold unintended consequences (and still get nowhere near the tax take their useless models predicted)

        1. sabroni Silver badge
          Mushroom

          Re: IR35 hasn't 'just come in'

          I didn't say that. I said "IR35 came in". The question was "did something change that makes people more exposed now than at any time before?" 20 years is covered by "at any time before".

          Highly technical my arse.

  2. Mike Lewis

    It's been a long day

    I thought "Why umbrella companies?"

  3. batfink Silver badge

    FTFY

    This week the Department for Business, Energy and Industrial Strategy said it would launch a new organisation to tacklesupport modern slavery, enforce the keep wages to a minimum wage and protect agency workersies.

  4. Howard Sway Silver badge

    the new body would be charged with ensuring vulnerable workers get holiday and statutory sick pay

    All governments love pretending to be interested in efficiency, so here's a suggestion that would actually be a lot more efficient : instead of seeing yet more bureaucracy added into the stew, make it a criminal offence to not pay workers what they have actually earned, you know with their actual work and all that. Send the bastards who don't to prison, and take the money owed from their personal pile, houses included. See how amazingly quickly they pay up, no "new body" required at all.

  5. Velv
    Mushroom

    Another Government fudge to make a perceived problem worse rather than better.

    Tax should be objective, a strict set of rules that can be clearly followed to determine any tax liability. All the government keeps doing is adding more subjectivity to the process thus expanding the exploitation of workers.

    The tax structure in the UK is no longer fit for purpose and needs to be substantially replaced. But no government will do it because they know it will expose the exploitation of the lower paid today in favour of saving the higher paid money.

  6. Ian Johnston Silver badge

    It's a little hard to feel sympathy for those being ripped off by systems they set up to avoid paying their fair share of tax and NI. It's like people who call the cops because the drugs they bought weren't of sufficiently high quality. Play silly games, win silly prizes.

    1. Just tell the truth

      Lets get some things stright

      Unfortunately Contractors are a victim of a media campaign by HMRC in order to discredit them and so be able to bring forward poor legislation with the support of the general public.

      Lets set some of the myths straight,

      Most contractors do not earn £250,000 per year it is more like £70,000 - £80,000 (Given that the average salary of a senior programmer in the US is $100,000 per year this does not seem an unreasonable amount of money, The UK undervalues software developers significantly and is one of the reasons people go contracting)

      Contractors do not generally set up Ltd companies in order to avoid tax. The only ways to be a contractor are either through a Ltd Company or via an Umbrella Company. Given the bizarre nature of Umbrella Companies it is not rocket science to realise why most have chosen Ltd Companies.

      Most contractors pay a significant amount of Tax. In fact if I were to go Perm then the amount I would pay in tax would drop. It would be slightly higher as a percentage of my pay but HMRC would get less money overall. The tax is only very low if you remain under the 40% threshold after dividends have been paid. So unless you are amassing a huge amount in the business account then there is not a huge tax gain.

      Contractors are incredibly important to our economy. Take a software project. A company will normally need a large number of very skilled workers to build a system, however when the system is complete they then only need a small number to keep it maintained. That small number are the Perm workers the surge workforce is made up by contractors as they will only need them for a certain time and then they are off the project. Basically most software projects would not be viable if they had to be done only by a permanent workforce and even then many of those perm workers would be hired for 9 months at a time and got rid of in order to to make sure no redundancy had to be paid.

      Now a small number of contractors do take part in some questionable tax practices. However there are either already laws to deal with that or those loopholes should be closed. There is also a need for tax rules to prevent companies from making employees leave and come back as contractors in order to save on NI. (Yes it is not contractors but companies that are the ones benefitting most from tax). However IR35 is horrifically flawed and does not do what it say it is.

      HMRC have consistently lied about IR35. They claim that 90% of contractors are avoiding tax yet their own data shows this to be pretty much the opposite. They are also lying about the rules to companies via webinars which are designed to scare companies into making their contractors inside IR35 despite HMRCs own guidelines supposedly banning blanket assessments... It seems like around 80% of contractors deemed inside IR35 believe they are incorrectly assessed as inside and a number are ready to take the clients to court over this.

      IR35 makes contractors pay tax as an employee (if deemed inside) yet does not stipulate employment rights for those contractors. The result is that if you are inside IR35 you are deemed an employee for tax but as a contractor for employment law. This is clearly unfair and the Governments own advisors have said IR35 changes should not have been brought in without employment law also being changed to reflect this. HMRC ignored this advice and have told contractors that we should go to court if we want employment rights. Now, if you think contractors should pay identical tax as perms then you should also agree that those contractors should also have the same employment rights as perms?

      Contractors have to pay for their own training, their own holiday pay, their own sick pay and their own equipment, along with business insurance and accountants. The small amount of tax saved does not make up for these additional costs. If we are supposed to operate like any other Ltd company then we should be taxed like any other Ltd Company...

      Contracting is open to all. It is not an exclusive club. There is a good reason many people do not go contracting and remain perm. For those that moan about contractors then I always say "Well become a contractor then!"

  7. Mike 137 Silver badge

    "...costing HMRC and the contingent workforce billions in pounds each year"

    "umbrella companies non-compliance issues, which is costing HMRC and the contingent workforce billions in pounds each year"

    The big (but not remotely funny) joke is that umbrella co. fraud is costing HMRC vastly more than entirely legal "personal service company" tax avoidance ever did. But that seems OK with government, as this whole IR35 debacle is politically, not financially, motivated. Government hates to see individuals exercising personal freedoms. We're all expected to march predictably in lockstep to the same tune.

    1. Roland6 Silver badge

      Re: "...costing HMRC and the contingent workforce billions in pounds each year"

      I assume when a contract finishes the umbrella company goes bust(*) - unable to meet its payroll liabilities and before it has actually paid anything to HMRC...

      (*) Naturally, a new umbrella is formed for a new contract so as to benefit from any startup benefits...

  8. This post has been deleted by its author

  9. Wincerind
    Joke

    I hadn't realised there were so many problems with umbrella manufacturers.

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