Tackling non-compliance in the umbrella company market
Read the full outcome
Detail of outcome
The previous government launched a consultation on tackling non-compliance in the umbrella company market from June to August 2023. The consultation made proposals with the aim of gathering responses from stakeholders about the most effective way to address issues of tax and employment rights non-compliance by umbrella companies.
The government considers action in the umbrella company market is imperative to protect the most vulnerable workers. Informed by the responses to this consultation, the government is legislating to bring umbrella companies within the definition of employment businesses. This will allow for their regulation and will bring them within scope of the Employment Agency Standards Inspectorate’s (and subsequently, the Fair Work Agency’s) remit, through an amendment to the Employment Rights Bill.
The government is also committed to closing the tax gap and making the tax system fairer by ensuring temporary workers are protected from large, unexpected tax bills caused by unscrupulous behaviour from non-compliant umbrella companies. As announced at Autumn Budget 2024, where an umbrella company is used in a labour supply chain to engage a worker, the government will bring forward legislation to move the responsibility to account for PAYE from the umbrella company that employs that worker, to the recruitment agency that supplies the worker to the end-client. This will take effect from April 2026.
This consultation response outlines the proposed options the previous government put to stakeholders in 2023 and summarises responses received. It also presents the government’s position on these proposals and outlines the action the government is taking to reduce non-compliance in the umbrella company market.
The government’s response to this consultation was published together with four other responses, all relating to amendments to the government’s Employment Rights Bill, as part of its Plan to Make Work Pay. The others can be found on the Make Work Pay page.
Original consultation
Consultation description
The government is responding to the call for evidence on the umbrella company market that closed on 22 February 2022. The government is also publishing a consultation seeking views from stakeholders on proposals to regulate umbrella companies, which a significant number of respondents supported. It also seeks views on options to tackle tax non-compliance in the umbrella company market that respondents to the call for evidence suggested is causing harm to workers, businesses and taxpayers.
Documents
Updates to this page
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Response to the consultation added.
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First published.