Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what steps his Department is taking to help ensure that the use of umbrella companies to employ contractors does not lead to a repeat of the IR35 disguised remuneration tax situation for those contractors employed through umbrella schemes.

As a result of the changes to the off-payroll working rules some businesses are reconsidering whether Personal Service Companies are still the best way to engage contractors who are working like employees. Some will choose to engage contractors in a different way, such as through an agency or umbrella company. Most umbrella arrangements are set up and operated correctly, and comply with tax, National Insurance Contributions and National Minimum Wage legislation, but there are some that are not compliant. HMRC have published guidance for people working through umbrella companies, which can be found here:

https://www.gov.uk/guidance/working-through-an-umbrella-company.

The Government remains committed to tackling those who promote disguised remuneration schemes, including through a package of measures to strengthen existing anti-avoidance regimes and tighten the rules designed to tackle promoters and enablers of tax avoidance schemes. These measures are being legislated for in the current Finance Bill.

In addition, on 23 March 2021, the Government launched a consultation on a further package of measures to tackle promoters. These include ensuring HMRC can protect their position by securing or freezing a promoter’s assets so that the penalties they are liable for are paid, tackling offshore promoters and the UK entities that support them, closing down companies that continue to promote avoidance schemes and disqualifying the directors involved, and supporting taxpayers to identify and steer clear of avoidance schemes.

HMRC have launched a publicity campaign targeted at contractors to help them spot and steer clear of tax avoidance and HMRC have also proactively contacted 17,000 businesses highlighting the support available that they can share with contractors.