The jaw-dropping revelations contained in a report from a large Parliamentary group exposes the significant malpractice which is being committed in the supply chain by many umbrella companies and recruitment agencies. It must shame the Government into immediate action.
The tireless work of the Loan Charge All Party Parliamentary Group (APPG) has shone the light on a scandal which has left honest people on modest incomes with life-changing tax bills, while the promoters who sold the schemes which caused such “serious distress” live the high life.
The APPG report outlines how misconduct has driven the operation and mis-selling of tax avoidance schemes, which has caused the supply chain to be dubbed the ‘Wild West’ by many professionals.
The APPG uncovered evidence of recruitment agencies demanding ‘kickbacks’ or incentives from umbrella companies for being added to a preferred supplier list. These kickbacks included fitted kitchens and holidays for recruitment agency directors, according to the APPG’s report.
This unethical behaviour incentivises non-compliant providers to offer large bonuses to gain access to potential clients.
In some cases, contract, freelance and locum workers are being pushed to use a specific umbrella company and, in other cases, workers are given no choice as to which umbrella company to use.
This is a particular problem when the only source of work in a sector for lower paid contract and locum workers is through recruitment agencies.
In some instances, public sector approved agencies and even public sector organisations themselves have recommended people use umbrella companies that have put them into ‘disguised remuneration’ schemes, the APPG report said.
Some umbrella companies appear to be unlawfully deducting employers' taxes from contractors’ pay, according to the APPG report.
There is overwhelming evidence that the unregulated umbrella market is simply out of control. The market is exploiting contractors and the lack of tough regulation is surely a reason for tax avoidance schemes being openly advertised.
Ruth Cadbury MP, the co-chair of the APPG, told the Commons: “The Government and HMRC are well aware that schemes are still being sold – mis-sold – to people including...low-paid public service workers, nurses, doctors in the NHS and other clinical specialists, teachers and social workers.
“Schemes must be stopped now rather than trying to have to go after promoters when the damage has been done.”
A Government spokesperson told me that protecting and enhancing workers’ rights through robust regulation, including for those employed by umbrella companies, is a top priority for Boris Johnson's administration.
The spokesperson added: “We have already introduced requirements to improve the information provided to new agency workers about their contractual terms and pay rates, and have committed to establishing a single enforcement body to further protect vulnerable workers.”
The Government’s commitment to introducing legislation to expand state enforcement for agency workers to cover umbrella companies is a vindication of everyone who has raised concerns over the loan charge scandal, which has brought misery to thousands of honest people who had no intention of avoiding their responsibilities as taxpayers.
Tragically, seven suicides were reported to the APPG in the last Parliament. The Government has an historic opportunity to align tax and employment law, to ensure that anyone who is taxed as an employee receives the corresponding benefits.
The Government could bring a sense of closure to this terrible saga. Seven grieving families have a right to be heard as this legislation is formed.