Campaigners have urged the British government to fully fund a new single enforcement body (SEB) to protect workers’ rights, including those who use unregulated umbrella companies.
In an open letter to Paul Scully MP, Parliamentary under-secretary of state in the Department for Business, Energy and Industrial Strategy (BEIS), supporters of better safeguards warn the failure to secure sufficient funding would expose workers to the continued abuse of employment rights and could lead to tax evasion by unscrupulous umbrella companies.
What is IR35?
IR35 is a tax reform that was unveiled in 1999 by the UK tax authorities. The latest regulation change – from April 2021 – will force medium and large businesses in the UK to set the tax status of their contractors and freelancers. Previously this was set by the contractors themselves.
Contractors found to be within the scope of the legislation – ie, inside IR35 – will have to pay more tax than they might expect.
The reforms are part of the government’s crackdown on so-called disguised employment, where workers behave as employees but avoid paying regular income tax and national income contributions by billing for their services through personal service companies, which are taxed at lower corporate rates.
The letter was penned by tax expert Rebecca Seeley Harris, chair of Employment Status Forum, and James Poyser, CEO of inniAccounts and founder of campaign group offpayroll.org.uk.
In it, they insist that “regulation and enforcement are the best and only ways to protect workers’ rights.” And they reckon a fully resourced SEB would also “thwart unethical practices and overcome the widespread tax evasion in the umbrella market.”
“We have made it clear in our submission,” wrote Seely Harris and Poyser, “that if sufficient funds aren’t allocated to the SEB, then existing bodies will need an urgent increase in funding to protect umbrella workers.”
In June, the government announced plans to tackle modern slavery, enforce the minimum wage, and protect agency workers. But in a last-minute change, it also agreed to bolt-on plans to regulate umbrella companies which have seen a surge in popularity among IT contractors following IR35 tax rule changes in April this year.
While this was welcomed at the time, there were concerns that the eleventh-hour change of heart may not receive the full backing – or funding – required. With the deadline (September 30) for submission to the Government’s 2021 Autumn Budget and Spending Review now closed, campaigners want to make sure that the officials responsible within the BEIS understand the importance of stamping out rogue practices.
“We remain steadfast to our recommendations that regulation of the market is an essential step to prevent further abuse of workers’ rights and tax evasion,” wrote Seely Harris and Poyser.
“We trust you will be representing this case with the Spending Review. It’s time to act and stamp out mini umbrellas, unethical business practices and tax evasion by umbrellas, and create a system that positions the UK as a leader in global labour markets.”
The letter also includes half a dozen examples where regulation would protect staff, including an estimated £2.5bn owed in holiday pay, and cites the recent cyber-attack on Giant Group last week – covered in The Register here and here – which left thousands of contractors in the dark and “unable to meet their financial obligations.” ®
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