Question to the HM Treasury:

To ask the Chancellor of the Exchequer, if she will make an assessment of the potential impact of her policies on tackling non-compliance in the umbrella company market on the number of joint employment models.

The Government recognises the positive role that compliant and well-managed umbrella companies can play in the functioning of the temporary labour market. However, non-compliance in the umbrella company market is widespread and costs taxpayers billions of pounds a year.

HMRC analysis shows that at least 275,000 workers, and likely significantly more, were engaged at some point in 2022 to 2023 by umbrella companies that were involved in tax avoidance, evasion or fraud. In the same year around £500 million was lost to disguised remuneration tax avoidance schemes, almost all of which was facilitated by umbrella companies. Hundreds of millions more was lost to so called ‘mini umbrella company’ fraud and other fraudulent attacks by people abusing umbrella company structures.

The Government is committed to closing the tax gap and making the tax system fairer by ensuring temporary workers are protected from large, unexpected tax bills caused by unscrupulous behaviour from non-compliant umbrella companies. That is why the Chancellor announced in her Autumn Budget that the Government will introduce legislation to make recruitment agencies using umbrella companies legally responsible for accounting for PAYE on workers’ pay.

The Government set out the expected Exchequer impacts of this measure at the Budget. The Government will publish a full Tax Impact and Information Note later this year.