In a recent webinar hosted by us at Giant Group, we delved into the potential implications of the umbrella consultation initiated by HMRC. This consultation aims to address non-compliance issues within the umbrella and recruitment market, and it has significant implications for businesses. In this blog post, we will provide a summary of the key points discussed during the webinar.
The Speakers:
The webinar, hosted by Richard Berrisford, a Business Development Manager at Giant Finance+, featured two keynote speakers:
Michael Howard, Head of Agency Sales at Giant Group, with 14 years of experience in helping agencies navigate legislative changes.
Dan Haslam, Group Sales Director at Giant Precision and a board member at the FCSA, the UK's leading membership body for umbrella companies and related services.
" The consultation period ended in August, and the response from HMRC is expected in November. Speculation suggests that any changes may take effect around April 2024."
The Background and Objectives:
HMRC initiated the consultation to address non-compliance with tax and employment rights by umbrella companies.
The government's three main objectives are to improve outcomes for workers, level the playing field in the umbrella market, and protect taxpayers from revenue losses due to non-compliance.
HMRC proposed three options to tackle tax non-compliance:
1. Mandatory due diligence requirement with penalties.
2. Legislate to allow HMRC to collect umbrella company tax debts.
3. Deem the employment business supplying the worker as the employer for tax purposes.
The consultation also sought views on reducing fraud related to the employment allowance and VAT flat rate scheme.
The Scope of Non-Compliance:
Non-compliance in the umbrella marketplace has been a persistent issue, with various forms of non-compliant payment structures. Examples include offshore-based companies, dividends, and 'mini-umbrella' companies.
Timeframes:
The consultation period ended in August, and the response from HMRC is expected in November. Speculation suggests that any changes may take effect around April 2024.
Potential Risks:
• Risks include reduced umbrella usage, increased risk by engaging workers directly with reduced ability to leverage payment terms – huge strain on the business that is managing the debt.
• Reduced umbrella rebate. If umbrella usage is reduced who is going to replace this revenue?
• PSL consolidation means that smaller/less financially stable companies may struggle to support agencies and workers.
• Increased risk of fines, and the need for due diligence against non-compliant providers.
Reactions to Proposed Changes:
Agencies and hirers may react differently to the three proposed changes, with option 2 potentially causing disruption similar to the reaction to IR35. Option 3 will lead to a big increase in demand for agencies to provide PAYE, but umbrellas can play a role here.
Potential Solutions Available:
Tightened Supply Chain Control: One option involves reducing the number of preferred suppliers in your supply chain. This can help you exert tighter control over compliance, aligning with HMRC's objectives.
PEO/PAYE Solutions: giant group offers over a decade of experience in providing Professional Employment Organization (PEO) and Pay-As-You-Earn (PAYE) services. This service includes various benefits, customisable payment terms, and flexibility in client PAYE references and contract structures.
Giant Finance+: This service is available to ensure the proper insurance and compliant management of any associated debt, providing added security and peace of mind for businesses.
These solutions are designed to help businesses adapt and stay compliant with the changing regulatory landscape.
Audience Questions:
The webinar concluded with a Q&A session where attendees asked questions about the potential impact of the consultation on their businesses. Questions covered topics like the future of umbrella companies, the likely choice of HMRC, the timeline for changes, and the support Giant Group can provide.
If you would like to watch this webinar, please contact us and we can sent it to you. For those interested in further discussions or assistance, Giant Group is ready to provide guidance and support.