Following feedback from members and further afield, the Association of Recruitment Consultants (ARC) has submitted its response to the government’s consultation on ‘Tackling non-compliance in the umbrella company market’.

The consultation sought to address both employment rights abuses and tax non-compliance by umbrella companies. Whilst ARC welcomes the consultation and the government’s plans to regulate the umbrella marketplace, ARC believes the approach proposed in the consultation does not comprehensively achieve this objective. Furthermore, the proposals would be a disadvantage to employment businesses, contractors and compliant umbrella companies, with the potential to severely disrupt the umbrella market.

The most significant aspects of the proposals were:

• there should be a statutory obligation to perform mandatory due diligence with the intention that supply chains are secured against tax non-compliance in all its forms including error, with a penalty regime where due diligence was not undertaken
• transfer of tax debt owed by an umbrella company to another party in the supply chain
• making the employment business the deemed employer of the worker for tax purposes

As an alternative approach, one which would benefit the market, ARC has put forward a proposal for a self-funded registration scheme run by one trusted organisation that is both independent and impartial, namely a government-run operation.

ARC Chairman, Adrian Marlowe, comments “Almost exclusively every agency we spoke to objected to the three proposals but was in favour of a registration scheme due to its simplicity and impartiality which supports the umbrella marketplace, achieves the objective to address non-compliance, and avoids interference with the labour supply market.”

For more information on the consultation, ARC’s responses and to share your opinion please contact us at