24 March 2025
The Freelancer and Contractor Services Association (FCSA) has released a report rebutting the governments planned changes to further regulate the umbrella company market.
The proposed changes would shift the responsibility for ensuring PAYE is operated compliantly from the umbrella companies to the agency or employment business.
However, the FCSA believe they have identified flaws in the reasoning for this policy change, stating that the changes will:
- Cost the Exchequer £7.5 billion
- Reduce workers access to employment rights
- Increase tax evasion
- Incentivise the proliferation of small, non-compliant “mini-recruiters”
- Complicate tax administration for workers
- Massively increase the burden on HMRC in dealing with workers’ tax issues
- Massively increase the burden on HMRC in detecting bad actors
- Fundamentally disrupt an effective, efficient and well-formed market
- Target an ambitious timescale which few in the market believe to be achievable.
The FCSA believes this will move compliance issues from a small number of umbrella companies to a much larger base of employment businesses, creating a larger pool for HM Revenue and Customs (HMRC) to enforce and regulate.
The report calls for the following actions:
- Immediate withdrawal of the proposal announced in Budget 2024
- The considered and properly planned establishment of a Payroll Intermediary Licensing regime as the most effective solution for non-compliance, enabling
- A holistic solution to the problem
- A digital data-led inspection system
- Introducing accountability within the whole supply chain
- Targeted enforcement measures against bad actors
- Applying the already extensive existing legislation
You can read the full report for further data and investigative work from the FCSA.
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