ICAEW suggests that the off payroll working problem, which has led to the increase in the use of umbrella companies by employment intermediaries, could be resolved by eliminating opportunities for arbitrage that arise from rates of tax and NIC being different depending on employment status for tax.
Many organisations in the private and public sectors use employment intermediaries to provide a flexible workforce and umbrella companies are increasingly being used to employ workers provided by employment intermediaries. However, organised crime groups (OCGs) are using umbrella companies to exploit the UK tax system and employees. OCGs can flourish and undercut complaint operators because of ineffectual policy and inadequate enforcement by the government of employee rights, tax rules and company law.
The off payroll working problem could be permanently resolved if the total amount of tax and national insurance contributions (NIC) payable by individuals and the engagers of workers was the same or similar across all sources of income and did not vary between those who the tax system currently treats as employees and as self-employed.
ICAEW’s Tax Faculty expressed this view in ICAEW REP 81/23 in response to the consultation Tackling non-compliance in the umbrella company market published on 6 June by HM Treasury, HMRC and the Department for Business & Trade (DBT). This repeats what the Tax Faculty has said on previous occasions.
Pending a long-term solution, the...
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