The umbrella guidance unpacked…
This HMRC-authored resource is designed to give workers a better understanding of how operating through an umbrella company works in practice – from providing further information on how you get paid, to advice about checking your payslip for the correct deductions.
A number of experts reacted to the updates positively, as the best official brolly guidance yet. I don’t entirely disagree.
However, the guidance is far from the finished article and, in my opinion, there’s a lot more the government could and should do to educate workers about working through umbrella companies in this day and age.
Clarity is better for everyone concerned
Let’s start with the positives, though. This was by no means a wasted exercise. After all, the more informed umbrella workers are about operating in this manner, the better.
While still relatively lightweight in my view – as the topic of payslips alone is complex – the improved guidance (which outlines what to expect on a compliant umbrella payslip) could help individuals spot the more obvious cases of ‘salary skimming’ and holiday pay withholding. And if it prevents just one worker from being short-changed on their take-home pay, then it’s been worthwhile.
As the HMRC guidance outlines, it’s vital that workers are able to question calculations in a payslip if something doesn’t look right or something’s not understood. Payslips can intentionally be made unnecessarily complicated when an umbrella is taking more than it should.
A sign of the bigger problem
But the very fact that this guidance is still required is a sign of the bigger problem. This problem I’m referring to, of course, is the proliferation of tax avoidance schemes claiming to be compliant umbrella companies. These operators continue to lure in unsuspecting workers who, after being pursued by HMRC, can be left with devastating tax bills.
The government is yet to deliver on its promise to regulate the umbrella industry, mainly because it has shelved the Single Enforcement Body.
But regulating brollies would be an important step in putting a stop to these dodgy schemes once and for all and, at the same time, it would help rebuild the tarnished reputation of the umbrella sector. It would also mean there would be less reliance on government guidance, which isn’t comprehensive enough by any stretch of the imagination. Bear in mind that, with umbrella working alone, we’re getting from the government not even 1340 words to cover the complexities of this increasingly common way to work.
However, that this guidance is lacking in certain areas isn’t necessarily a surprise. For whatever reason, the government hasn’t been tuned into the true impact of the key issues affecting independent workers – whether that’s umbrella regulation, tax avoidance schemes or the IR35 legislation.
So where do we go from here? Well, I expect HMRC’s umbrella guidance to be tweaked, elaborated upon and gradually improved over time. And while helpful (particularly if ‘skimming’ makes it into a future update), if I’m totally honest, the guidance is just a case of papering over the cracks – ignoring the root causes of the problem.
The Spring Budget 2023 on March 15th provides the perfect opportunity for the chancellor and prime minister to up their game and show this vitally important sector that this administration is serious about making a difference.
In the meantime, the compliant umbrella companies – of which there are plenty I should add – must continue to self-regulate and demonstrate to workers, agencies and end-clients that they are safe to work through.
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