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However, umbrella companies were suitably high on the agenda to merit a mention from the Dispatch Box. In the section on tax avoidance, George Osborne said: "We are also consulting on other measures including the use of so called ‘umbrella companies’ to deprive people of basic employment rights like the minimum wage and avoid tax."
This follows concerns which have already been expressed from the trade unions (See: Unions urged not to tar all umbrellas with the same brush - Shout99, Nov 2014). And it had been widely trailed that Labour leader Ed Milliband intended to use his Party Conference speech to launch an attack on rogue umbrella companies, but in the event nothing appeared. It was never clarified whether theis was intentional or an accidental omission. Labour denies umbrella clampdown amid confusion Shout99, Sept 2014).
Nevertheless, there is now no doubt that rogue umbrella companies are on the Government's agenda. The fear among compliant companies is that a sledge-hammer might be used to crack the nut.
Travel expenses
The documentation expanded slightly on the Chancellor comments with the promise of further consultation on travel expenses with a commitment to possible action at the next Budget.
1.251 As part of its reform of the rules for employee benefits and expenses in response to recommendations by the Office of Tax Simplification, the Government will stop tax relief from being claimed on reimbursed business expenses when they are paid in conjunction with a salary sacrifice scheme. The government is also concerned at the growing use of overarching contracts of employment by employment intermediaries such as ‘umbrella companies’, which allow some temporary workers to benefit from tax relief for home-to-work travel expenses that is not generally available to other workers. The Government will review these arrangements and publish a discussion document inviting representations from interested parties to inform potential future action.
2.147 Overarching contracts of employment and temporary workers – The Government will review the increasing use of overarching contracts of employment by employment intermediaries such as ‘umbrella companies’. These arrangements enable workers to obtain tax relief for home to work travel that would not ordinarily be available. The Government will publish a discussion paper shortly to inform possible action at Budget 2015.
Crackdown - giant
Matthew Brown, Managing Director of umbrella providers, giant group said: “We welcome the planned crackdown on non-compliant umbrella employers in the UK. The flexible workforce is an important contributor to the UK economy and so any measures that improve the working options of contractors across the country, and at the same time stamp out malpractice, can only be a good thing.
"At giant we offer an over-arching employment contract that ensures each contractor not only receives the statutory benefits that they are legally entitled to, but also remain compliant in terms of tax reporting and national insurance.”
“As a business that is committed to full and ongoing HMRC compliance and ensuring contractors have access to fair working opportunities, we continuously support any measures that ensure the flexible workforce has access to the relevant employment rights. We intend to participate in the discussion document due to be published by the Government to not only assist with this crackdown on non-compliance, but also guide any reforms to ensure they meet the needs of contractors.”
Breakthrough - Parasol
Professional employment services provider Parasol were upbeat about the plans to scrutinise umbrella companies as part of a crackdown on tax avoidance.
Parasol founder and chief executive Rob Crossland hailed Mr Osborne’s comments as a potential 'breakthrough' for the professional contingent workforce services sector.
He said: “This could be the landmark moment that policy-makers finally take the time to properly understand our industry, differentiating between unethical cowboys at one end of the spectrum and compliant, professional providers such as Parasol at the other.
“Any umbrella company that fails to offer genuine employment rights or pay the minimum wage deserves to be placed under the spotlight. Such practices are unacceptable – they do a disservice to workers, our sector and the UK economy as a whole.
“I was slightly concerned by the premise of Mr Osborne’s statement, which seemed to imply that he thought all umbrellas deprived people of basic employment rights. However, the forthcoming review offers the ideal opportunity to address any such misconceptions.
“Parasol provides employment and support for thousands of skilled workers, and contributes around £150m to the Treasury every year. We relish this opportunity to make this point to government during the consultation.
“With regards to travel expenses, we welcome the opportunity to create a level playing field and ensure that any abuses of the system are stamped out.”
Caution - IPSE
Andy Chamberlain, Senior Public Affairs Manager at self-employment trade group IPSE, also sounded a note of caution.
He said: "It is encouraging that the Chancellor is introducing measures to crack down on tax avoidance. However, we urge that the Chancellor ensures that any changes to umbrella companies provide real benefits to those using these structures and do not inadvertently affect the genuinely self-employed."
Shout99 will be reporting up-to-date news and expert analysis on all aspects of the Autum Statement 2014 which affect freelancers and small businesses. Keep watching our Political News section.
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Susie Hughes © Shout99 2014
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