Our working practices and expectations have changed dramatically over the last 40 years. Many of us are no longer tied to a nine-to-five, office-bound job, and lots of us have chosen to work for ourselves as contractors or freelancers. With this new, mobile and adaptable workforce has come a raft of regulations and employment legislation as policymakers try to keep abreast of the fast-changing landscape of modern working life.
However, not all the legislation that has been introduced serves or supports the contracting sector well and its unintended consequences affect the whole of the supply chain. Advice from stakeholders and industry experts has been ignored and current legislation fails to address the underlying issues and challenges that our industry faces – non-compliance (ensuring all providers operate within the same tax rules), transparency (ensuring workers fully understand the implications of such practices as Off-Payroll working) and enforcement (ensuring enforcement strategies effectively support compliant parts of the sector).
A radical rethink of legislation and a simplification of the rules is now required urgently. Contracting and flexible working is now formally part of many companies’ structures and provides the flexibility and agility that many modern businesses need to survive. In light of some recent bad press regarding malpractice in certain parts of the sector, the reputation of the umbrella industry has been tarnished, due in part to governmental inactivity which many have seen to empower bad practice.
What can be done?
There are several short-term solutions which could be applied which would help:
Proactively use existing data
In order to highlight potential disguised remuneration schemes HMRC should develop a tool that integrates the intermediary reporting data against the RTI data. This would enable authorised users to interrogate the data within set parameters allowing better comparison and highlighting of trends to better inform the wider enforcement picture.
HMRC Umbrella Pay Calculator
If HMRC developed a calculator, hosted on .gov website for example, checks could be made by workers, with the output providing a detailed breakdown of all costs, including employment costs. Such a calculator would allow HMRC the opportunity to highlight common areas where disguised renumeration or other hidden costs could be found. The calculator could also include a reporting function by which to report anomalies when matched with HMRC’s own illustration, thereby providing valuable intelligence to help inform enforcement.
HMRC Umbrella Payslip Checker
An add-on to the calculator could be an umbrella payslip calculator, designed to check workers’ payslips for accuracy, with the built-in ability to be able to report any concerns directly to HMRC. This would enable HMRC to promote the Personal Tax Account which validates payslip information. In addition it would help to clamp down on providers who produce false payslips.
PAYE Rates Benchmarked
In advertised roles, where the rate offered is not PAYE, a set formula to create a benchmarked PAYE rate should be used and advertised as such. This would enable workers to assess the true value of differing roles, using a ‘common currency’.
Status Indicator
In order to assess the true value of any assignment, contractors must understand not only its Off-Payroll status, but also the levels of Supervision, Direction and Control. And while this assessment can, in reality, only be finalised when the worker has been considered for a role, it should provide a provisional status. In many cases, however, the worker’s input is unlikely to alter the outcome.
Collegiate work with sector bodies
It is vital that HMRC, BEIS and EASI build closer and more productive relationships with compliance bodies and the wider sector. Currently compliance bodies set their own compliance standards and a more structured approach would enable individual departments to both inform and be informed on pressure points within the market. Compliance accreditation would also allow for faster reactions to market distortions and would help to limit and restrict market access to non-compliant schemes.
Protecting the integrity of compliance reviews
Compliance is a crucial component of the supply chain and it is important that reviews meet the very highest standards. HMRC should ensure that they establish ways to work with compliance providers and use the intermediary reporting vs RTI returns comparison tool to add an additional level of validity to compliance reviews. This would provide a significant obstacle to entry for non-compliant offerings.
In the light of the changes to working practices that the last three decades have brought and the challenges we now face, it is more important than ever that everyone within the supply chain, together with policymakers, take a collegiate and non-adversarial approach to working together. Only then can we face the future knowing that we are doing our very best to raise industry standards and break the links with those who behave unethically and disregard the rules.
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