Call for evidence on umbrella sector to help end disguised remuneration

(3 minutes to read)

LITRG: ‘Many umbrella companies adhere to certain standards, are clearly concerned about the welfare of their workers and want to drive the sector forward.’

There has been a cross departmental call for evidence on the umbrella company sector with the aim to put an end to disguised remuneration issues.

The Low Incomes Tax Reform Group (LITRG) welcomes this government decision and hopes it will end low-paid agency workers being paid through disguised remuneration.

Meredith McCammond, Technical Officer at LITRG, commented, “This consultative approach by government is a great opportunity for it to gather evidence about the actual and current problems with umbrella companies. This must include first-hand evidence from workers who have found themselves in a disguised remuneration scheme. We encourage the Government to think creatively about how it can gather insight directly from workers.

“Many umbrella companies adhere to certain standards, are clearly concerned about the welfare of their workers and want to drive the sector forward.

“But lower-income workers without a tax avoidance motive continue to get caught up with those umbrella companies that use disguised remuneration schemes to pay them. Disguised remuneration has a significantly bad impact on the well-being of the workers involved. And it also tarnishes the reputation of the entire umbrella industry. Progress by HMRC to stop these disguised remuneration schemes at source has been slow so far.”

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McCammond added, “HMRC are focussed on taking action against promoters of tax avoidance schemes and educating workers against the risks of using disguised remuneration schemes. But this assumes that there is a sophisticated promoter structure in place and that workers are making the choice to enter into schemes. While that is true in some cases, in our experience the problem has shifted and is no longer something akin to traditional tax avoidance.

“We have been urging HMRC for some time to recognise that some workers will be unaware that they are in a disguised remuneration scheme as the motivation and benefits sit with others in the labour market supply chain. Understanding this is key if HMRC wants to develop a successful strategy to tackle disguised remuneration in this part of the market.”

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