Umbrella Companies featured in Treasury Questions this week with 2 questions from Labour MP’s.

The questions appear to show a misunderstanding about how compliant umbrella companies operate.

A group representing umbrella companies and employment intermediaries held a lobbying event on 11^th March at the Houses of Parliament which has hopefully gone some way to clarifying these inaccuracies for those MP’s that attended.

Below are the questions and responses:

Question 1:

John Cryer Labour, Leyton and Wanstead

Further to Question 8, what measures is the Chief Secretary taking to tackle the activities of payroll and umbrella companies that promote bogus self-employment which in turn fuels widespread tax evasion?

Danny Alexander The Chief Secretary to the Treasury

We have already announced measures to deal with intermediaries, both offshore and onshore. As the hon. Gentleman will know, a consultation on the issue is taking place at the moment, and it is important to ensure that companies cannot put in place artificial arrangements that are designed to reduce their tax bill and often have the consequence of removing important employment rights from workers. We continue to take that matter incredibly seriously.

Umbrella.co.uk comment: Umbrella Companies do not promote “bogus self-employment”. Quite the opposite. All umbrella company workers become employees of the Umbrella Company and as such have PAYE and National Insurance deducted at source. This aids the collection of taxes for the Treasury. Umbrella.co.uk are UK based, subject to UK tax and do not operate offshore.

Question 2:

Emma Lewell-Buck Labour, South Shields

To follow up the question from my hon. Friend John Cryer, it appeared from recent written answers that the Government are leaving open loopholes that see workers lose hundreds of pounds a month from rip-off umbrella companies. Why is that?

Danny Alexander The Chief Secretary to the Treasury

As I said, we are consulting on that matter and have already taken considerable action to deal with intermediaries. I am sure that more will be said about the issue in due course.

Lisa Keeble, Contractor Umbrella, has added the following to the point raised by Emma Lewell-Buck:

I would respectfully point out that compliant PAYE umbrella companies do not 'rip off' workers; they are employers like any other and they offer Statutory entitlements to workers who would otherwise have no rights as they would operate as sole traders. Much of the adverse press for umbrella companies has come from the introduction of legislation which forced CIS workers from self-employment into employment; this move meant that a liability for class 1 National Insurance Contributions came into play whereas previously the worker would have only paid Class 2 and Class 4 NIC's. The liability for Employer's National Insurance and other employment responsibilities could have been picked up by the construction companies who exercised supervision, direction and control over the workers or by the recruitment agencies that source workers for the construction companies. However, both sectors decided to retain their existing profit margins and moved the employment responsibilities to umbrella companies who had for many years worked almost exclusively in the IT industry providing an employment vehicle for highly skilled, highly paid specialist workers. Many umbrella company CEO's, myself included, feel that employers or recruitment agencies should not be moving low paid workers to umbrella companies as it is simply not a suitable vehicle for them.

Umbrella.co.uk comment: Umbrella Companies seem to be accused of helping contractors evade tax in one statement and then for making workers worse off in another. As Lisa points out the adverse publicity being pushed by UCATT was actually as a result of Government Legislation regarding false self-employment that adversely affected Construction Workers who could previously be paid through the Construction Industry Scheme (CIS). This change was not the fault of the umbrella companies. In addition many umbrella companies did not operate CIS or actively switch them to being paid through an umbrella company and are therefore being unfairly tarred with this argument.

The full version of Treasury Questions, 10^th March 2015 is available at:

http://www.theyworkforyou.com/debates/?id=2015-03-10a.151.0&m=40366

For further information: Umbrella.co.uk 0800 121 6513 team@umbrella.co.uk