A Sliding Tackle for Non-Compliance in the Umbrella Payroll Industry - June 2023 Consultation Document Demystified

June 26, 2023
Tackling Non-Compliance in the Umbrella Payroll Market

Tackling non-compliance in the Umbrella Company market. Try saying it quickly three times without slipping up.

Amusing as that little exercise may be, the June 2023 consultation by HMRC is so much more than a tricky tongue twister. It looks to be yet another rumble in a looming shakeup of the Umbrella Payroll Industry. What is the consultation about? and more importantly what will it mean for your Umbrella Payroll Business? This article answers these questions.

What is the Umbrella Payroll Market consultation about?

In the opening lines, HMRC explain that the purpose of the consultation is to find ways to tackle non-compliance within the Umbrella Payroll Market. A key goal is to support a 'level playing field' within the Umbrella Payroll Industry.

Between now and 29 August 2023, HMRC will be collecting information in the form of a consultation with organisations in the Umbrella Payroll Industry. Following that date, we can likely expect some greater detail on the measures that will be put in place to tackle non-compliance.

You can read the document in full here: Tackling Non-Compliance in the Umbrella Payroll Market

What does it mean for my business?

In short, prepare for change. Even as a compliant, law-abiding business, you may need to adjust your practices to remain compliant. On page 57 of the consultation document, HMRC make this candid admission:

'There is no statutory definition of an umbrella company for
employment rights or tax purposes.'

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1161120/230411_Umbrellas_condoc_HMT_template.pdf#page=57

This may well change in the future. Whether you operate an Umbrella Payroll Company yourself or have dealings with one somewhere in your supply chain, the ramifications of a definition for tax purposes could impact your business.

Review your compliance processes

Now would be a good time to ensure that compliance is more than a buzzword, but instead, a determined mindset for you and your staff.

Not all compliance issues are the result of intentional rule-breaking. Take the time to review your business processes to ensure that a sloppy working practice doesn't become a compliance issue.

Use compliant providers

Indications from the consultation are that HMRC could choose to pursue non-compliance through the supply chain. Discussing methods of tackling non-compliance, page 33 of the consultation states the following as an option under consideration:

Transfer of tax debt that cannot be collected from an umbrella company to another party in the supply chain

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1161120/230411_Umbrellas_condoc_HMT_template.pdf#page=33

A sober examination of your supply chain now could save you a major upheaval down the line.

Use compliant payroll software

A favourite of ours (for obvious reasons), is using compliant payroll software. Make sure that your Umbrella Payroll Software uses the latest standards set out by HMRC. A good quality software package should also be able to adapt quickly when new legislation is introduced. Please have a look at our Umbrella Payroll Software section for more details on how our software could help your business remain compliant.

Embrace don't ignore

The overarching principle behind the consultation document is, play by the rules.

Rather than ignore or avoid changes in compliance legislation, seek to embrace them and build a stable business.

The information contained in this article isn’t intended as legal advice and shouldn’t be taken as such. If you have specific concerns or questions relating to legal obligations please contact a qualified legal advisor.

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