The government is publishing a call for evidence to ensure it has an up-to-date and well-informed view of how the umbrella company market operates. It is seeking views from stakeholders on the role that umbrella companies play in the labour market, and how they interact with the tax and employment rights systems.

This might sound familiar. This call for evidence follows a previous one dating back to July 2020 which was looking specifically into disguised employment and the use of umbrella company structures as a means of avoiding tax. This one has a different focus. It’s looking at the role that umbrella companies play in the labour market, and how they interact with the tax and employment rights systems. It sets out the concerns that have been raised by some stakeholders, as well as government action already taken to tackle tax non-compliance and improve protection for workers.

Key to this is understanding where the umbrella company sits in a typical labour supply chain and, helpfully, that is illustrated very well in the government’s consultation paper at paragraph 2.3.

So, a work-seeker approaches an employment business so that work can be found for them. The employment business may, at this point, require the work-seeker to be engaged through an umbrella company, potentially from their own preferred supplier list, or one suggested by the work-seeker. The umbrella company enters into a contract with an employment business to employ workers the employment...