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Article written by Tania Bowers, APSCo Global Public Policy Director.
On 21st July HMRC published details of the Joint and Several Liability that will apply to an umbrella company supply from April 2026. Details can be found here with an explanation of the statutory changes here.
These changes were expected and put simply recruiters and workforce solution providers can continue to work with umbrella companies as they have been doing, meaning that significant changes to processes and onboarding will not be needed BUT recruiters and outsourcers will be liable to HMRC for unpaid PAYE and NICs along with interest and penalties potentially, if the umbrella company does not pay its workers' taxes correctly. Much of the draft legislation focuses on anti-avoidance mechanisms and enforcement (Regulation 80).
This change is alongside the inclusion of umbrella companies in the Conduct Regulations, which will be brought into force in a year or so as part of the Employment Rights Bill reforms. Members are broadly supportive of any action that tightens up the umbrella market, however, there is more that HMRC needs to do to drive compliance and to ensure recruiters are not lumbered with an unreasonable burden. I give more details in the press release we published this morning.
Turning to the Employment Rights Bill, the Lords are debating amendments at Report stage this week. The Lords have passed some amendments which will be very useful to employers, such as a 6-month waiting period before unfair dismissal rights and the right to request (not be offered) guaranteed hours in some circumstances. The final amended bill will return to the Commons in September and the two houses will then negotiate the final wording before Royal Assent. Although the Government may make some concessions to the Lords, Baroness Jones, the spokesperson for the Government in the Lords, has made it clear its unlikely that they will move on fundamental principles such as the Initial Period of Employment (which is to be consulted on in the autumn).
In terms of how the market is responding to all this change, our members are reporting that genuinely independent contractual working, as per outside IR35, is being reconsidered by engagers given the changes impacting agency working and temp arrangements arising from both the umbrella company reform and the Employment Rights Bill. However, the challenge for our members is to educate engagers on the need for an overarching strategy around their workforce. This helps them recognise where, when and why a flexible workforce is needed and the nature of the services they want that flexible workforce to deliver, whether personal service, independent contracting or a contracted out solution.
Details of a survey being run by the CBI on IR35 can be found in this week's Political Monitor alongside details on the Chancellor's Mansion House speech and an insight piece on the rise of Reform.
We continue to have regular discussions with officials and politicians on the changes. The senior policy leads in DBT are keen to be sent evidence helping to build a current picture of the volume of the professional contracting market in the UK and the proportion of contractors that are paid in excess of permanent comparators. Anybody with salary surveys comparing permanent and temporary average rates by role, or who have evidence documenting assignment volumes, please do get in touch at the usual email tania.bowers@apsco.org.
