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 Strategy said it would launch a new organisation to tackle modern slavery, enforce the minimum wage and protect agency workers, work currently spread across three different regulatory bodies.

The single enforcement unit will take a “one-stop shop” approach to improve administration through better co-ordination and pooling intelligence, according to a BEIS statement.

But campaigners for the better regulation of umbrella companies – some of which have been accused of syphoning off pay through opaque fees and withholding holiday pay – said the new body would not go far enough in stamping out rogue practice.

Firstly, BEIS has set out no timetable for creating the single enforcement body, leaving workers grossly exposed, according to Rebecca Seeley Harris, chair of the Employment Status Forum and former senior policy adviser to HM Treasury’s the Office of Tax Simplifcation, and James Poyser, CEO of inniAccounts and online community Offpayroll.org.uk.

While the new body would be charged with ensuring vulnerable workers get the holiday and statutory sick pay they are entitled to without having to go through a lengthy employment tribunal process, there was no specific mention of the umbrella companies non-compliance issues, which is costing HMRC and the contingent workforce billions in pounds each year, the campaigners said in a statement.

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Seeley Harris said she was concerned that the single enforcement body would only be established through primary legislation when parliamentary time allows. “We will continue to press the government to set a timetable for primary legislation, commit to legislate and ensure our policy recommendations, that stretch beyond curtailing abuses and also reflect modern working practices, are included. We will also continue to press for the regulation of umbrella companies themselves and/or licensing but, at least this step will mean that there is an appropriate regulatory body.”

Introduced in April, new IR35 tax rules put a greater liability on organisations in regulating off-payroll working. A study by inniAccounts.co.uk has shown the new tax rules were supporting the growth of umbrella companies: 71 per cent of those inside IR35 are being paid by these third party admin and accountancy service outfits.

Poyser and Seeley Harris had submitted a draft policy entitled "Umbrella companies - Call for Regulation" to Jesse Norman, the financial secretary to the Treasury, and Paul Scully, the Parliamentary under-secretary of state in the Department for Business, Energy and Industrial Strategy.

In May, the UK Parliament decided not to select amendments to the 2021 Finance Bill designed to offer contractors protection from rogue umbrella companies. ®