HMRC’s wide-ranging consultation Tackling non-compliance in the umbrella company market, (covering both tax and employment rights), looked at options to regulate umbrella companies, with one principal aim being to deal with tax non-compliance in the umbrella company market. In response, the CIOT makes a number of suggestions on the tax non-compliance point:
Mandatory minimum due diligence requirements for organisations contracting with umbrella companies should reduce non-compliance, but would need to be proportionate and not unduly burdensome for those organisations.
An alternative approach, where HMRC maintains a list of registered umbrella companies which satisfy regulatory requirements, and which organisations could check before engaging, could be effective in tackling non-compliance.
The proposal to transfer tax debt to another party in the labour supply chain where the debt cannot be collected from the umbrella company would not, in itself, stop non-compliance – but would effectively require contracting businesses to make sure the umbrella company was complying with its tax obligations (although this might be difficult for them to check, and could leave them exposed). A better approach might be to target the owners and directors of the umbrella company rather than other parties in the chain.
Making the employment business, rather than the umbrella company, account for PAYE and NICs would address tax non-compliance, although this would move away from the more regular situation where the employer is responsible for PAYE and NICs on payments to its employees.
One key concern for HMRC has been around misuse of the VAT flat-rate scheme. Options could include requiring umbrella companies to apply for permission to use the flat-rate scheme, instigate checks when the first returns are received and deregister businesses from the scheme if necessary – or to remove the scheme completely for umbrella companies.
HMRC’s wide-ranging consultation Tackling non-compliance in the umbrella company market, (covering both tax and employment rights), looked at options to regulate umbrella companies, with one principal aim being to deal with tax non-compliance in the umbrella company market. In response, the CIOT makes a number of suggestions on the tax non-compliance point:
Mandatory minimum due diligence requirements for organisations contracting with umbrella companies should reduce non-compliance, but would need to be proportionate and not unduly burdensome for those organisations.
An alternative approach, where HMRC maintains a list of registered umbrella companies which satisfy regulatory requirements, and which organisations could check before engaging, could be effective in tackling non-compliance.
The proposal to transfer tax debt to another party in the labour supply chain where the debt cannot be collected from the umbrella company would not, in itself, stop non-compliance – but would effectively require contracting businesses to make sure the umbrella company was complying with its tax obligations (although this might be difficult for them to check, and could leave them exposed). A better approach might be to target the owners and directors of the umbrella company rather than other parties in the chain.
Making the employment business, rather than the umbrella company, account for PAYE and NICs would address tax non-compliance, although this would move away from the more regular situation where the employer is responsible for PAYE and NICs on payments to its employees.
One key concern for HMRC has been around misuse of the VAT flat-rate scheme. Options could include requiring umbrella companies to apply for permission to use the flat-rate scheme, instigate checks when the first returns are received and deregister businesses from the scheme if necessary – or to remove the scheme completely for umbrella companies.
