The Association of Recruitment Consultancies (‘ARC’) has responded to the Treasury’s proposed legislation imposing joint and several liability for umbrella taxes. This legislation is intended to apply from April 2026. ARC maintains that it will have a significant detrimental impact on recruitment supply, as drafted it does not meet the Treasury’s stated objectives and that ARC’s proposed umbrella registration scheme represents a far better alternative.
ARC’s response can be found in full here, and key points include:
- Definition of umbrella company is too wide bringing in scope agencies that employ workers
- Umbrella companies can avoid being in scope by engaging workers other than as employees
- Hiring clients may shift behaviour choosing to work only with the largest agencies, skewing the market and reducing flexibility and growth
- Loss of employment rights for workers which may disproportionately affect women
- Nothing to address fraudulent activity in the sector.
- Agencies will have potential tax liability for amounts that they have in good faith already paid to an umbrella, effectively incurring double liability
- Workers may still face tax bills if working with non-compliant umbrellas
- Creates an amount of uncertainty for businesses, punishing the innocent as well as the culpable
- Business will face increased costs, and introduces future and unknowable potential liability
- Strict liability, with no clear right of defence, creates unfairness
- If implemented, the legislation must include a warning system of umbrella default, evidence of taxes being sought from the umbrella, early access to information regarding the taxes due and calculations, available defences, timescales and processes for defence and a reduction in liability where reasonable care has been used.
ARC appreciates that some action is required to address umbrella non compliance, but ARC believes that there is a better option, which will improve compliance without imposing an unnecessarily high administrative burden and risk on recruiters and hirers. An umbrella registration scheme would meet the Governments’ stated objectives without incurring the damage to the sector that may be caused by this proposed legislation.
See here for detail on how you can support ARC in its effort to fight back against potentially damaging legislation.
For further information contact ARC on 01273 777 997 or info@arc-org.net
