Umbrella companies, which employ workers whose labour is supplied to an end-client by an agency, provide flexibility in the labour market. Most comply with their payroll withholding and employment law obligations, but the Government is consulting on proposals to ensure those that don’t are made to comply or excluded from the market. As regards payroll withholding obligations, these proposals could impose a statutory obligation on end-clients to undertake due diligence on any umbrella companies in their labour supply chain or could make them responsible for umbrella companies’ unpaid employment tax debts. Similar obligations might be imposed on employment businesses in the labour supply chain, or they could themselves be required to operate payroll withholding for umbrellas companies’ employees. This article looks in more detail at these employment tax proposals and what end-clients and employment businesses should consider doing now.
Companies that employ workers whose labour is supplied, on a temporary basis, to an end-client by an employment business (or recruitment agency) are often referred to as ‘umbrella’ companies by HMRC. But there isn’t currently any agreed definition of ‘umbrella company’ that’s used consistently in the market.
Director, Employer Reward Services
KPMG in the UK
Accordingly, the consultation (see our previous article) proposes the following two alternative ways to define ‘umbrella company’....
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