"Compliant umbrellas are still valuable" - APSCo

Agency representative body, APSCo, has come to the defence of compliant umbrella companies, while recognising that unregulated umbrella companies are an issue.

This follows the publication of the Loan Charge All-Party Parliamentary Group (APPG) report, How contracting should work, and calls from the report chair, Ruth Cadbury, for the UK umbrella industry to be 'shut down'. The Parliamentary Report called on the Government to take action to clean up what it described as the 'Wild West' supply chain that exploits freelance and contract workers and encourages tax avoidance schemes.

The spotlight has been focussed further on the freelancing sector by the introduction of the controversial 'off-payroll' or IR35 regulations in the private sector in April 2021.

Tania Bowers, from APSCo said: "We are supportive of the APPG's summary and recommendations and agree that Ministers, HMRC, BEIS and relevant Select Committees should review their recommendations as soon as possible. However, while we agree that the off-payroll reforms are misguided, we do not see Ruth Cadbury's approach to the Finance Act amendments to be the best way of bringing change to the umbrella industry.

"Many of the umbrella companies that our members work with - some of whom choose to join us as APSCo Trusted Partners - are experts in payroll and can offer contractors long term continuity of employment. Although many staffing businesses can and do run agency payrolls offering workers "worker rights", this is not necessarily better or indeed as good as the employment terms offered by compliant umbrella companies.

"APSCo's policy plan issued in February of this year echoed the asks of the APPG, including a need for Government to introduce a review of tax and employment status for the self-employed which needs to be accompanied by a new definition of these workers. Independent professionals should be defined as providing B2B services, as opposed to dependent contractors which provide personal services.

"We have also previously advised that the rollout of Off-Payroll needs to be accompanied by an implementation review to assess its impact on the economy and to enable Government to amend the policy where appropriate. It is APSCo's view that in addition to regulating umbrella companies, the Single Enforcement Body working with HMRC should introduce a base line compliance code for umbrella companies to adhere to. Code compliance could be evidenced by audits undertaken by authorised trade bodies, accountancy firms, and specialist compliance companies.

"The use of potential kick-backs to be added to preferred supplier lists is an issue that needs careful monitoring and we are aware of fees charged by some of our members for administering umbrella PSLs.

"However, we do have clauses in both our member and trusted partner codes requiring that these are appropriate, proportionate, and transparent. In order to regulate this, APSCo has a complaints policy and will investigate any member for alleged breach of our codes, which could ultimately result in a member's expulsion and we echo the APPG's sentiment that these codes should be standard practice for trade bodies.

"We expect our members to offer workers a choice of umbrella companies and recommend an Approved Supplier List of APSCo Trusted Partners, FCSA and Professional Passport members which offers both choice in number and compliance protection for clients and workers. We have worked on this basis for several years and this is in alignment generally with frameworks issued by the Crown Commercial Services.

"APSCo has also recently revised its Trusted Partner Umbrella Assessment to make it even more robust. We are in tune with the issues in the industry surrounding contractor holiday leave and pay, payroll deductions and expenses and we work with both our members and the broader community to ensure legal compliance and transparency.

"We also work closely with the HMRC IR35 Forum as the co-chair as well as BEIS, FCSA, Professional Passport and our other recruitment trade bodies and stakeholders on these issues and we feel there is a genuine commitment from Government to improve legislation and enforcement. However we will continue to push for the structural change to employment status upon which this all hinges."

A full copy of the 'How Contracting Should Work' is available here.