Business | Legislation | Tax

Tackling Non-Compliance in the Umbrella Company Market: UK Government’s Initiatives

The government has launched a consultation aimed at implementing measures to regulate the industry and ensure fair treatment of workers.


The umbrella company market in the UK has been under scrutiny due to concerns over non-compliance with employment rights and tax obligations. To address these issues, the UK government has launched a consultation aimed at implementing measures to regulate the industry and ensure fair treatment of workers. The consultation closes at 11:59pm on 29 August 2023.

In this blog post, we will explore the government’s initiatives and the responses they have generated.

Defining Umbrella Companies:

As part of the consultation process, the government proposes to establish a clear definition of umbrella companies. This step is crucial in distinguishing legitimate umbrella companies from those engaging in non-compliant practices. By providing a concise and comprehensive definition, the government aims to create a framework that ensures greater transparency and accountability within the industry.

Introducing Regulations:

One of the key objectives of the government’s consultation is to introduce new regulations for umbrella companies. These regulations would address various aspects, such as employment rights, tax compliance, and transparency of financial arrangements. By imposing stricter requirements on umbrella companies, the government aims to safeguard the rights of workers and minimize instances of non-compliance.

Changes to Incentives:

Another aspect of the government’s proposals is to reassess the incentives provided to umbrella companies. Currently, some incentives might inadvertently encourage non-compliant behaviours. By reviewing and revising these incentives, the government aims to align them with compliance and ethical practices. This approach seeks to promote a fair and level playing field for all stakeholders in the umbrella company market.

Mixed Reactions:

The government’s initiatives have elicited mixed reactions from industry stakeholders. While some view these proposals as a positive step towards addressing compliance issues, others believe that more decisive action is required. Those who support the government’s efforts appreciate the focus on cleaning up an industry plagued by non-compliance. They see the consultation as a positive step in the right direction.

On the other hand, critics argue that the proposed measures might not go far enough to tackle the scale of the problem. They emphasize the need for more immediate and robust actions to protect workers and maintain fairness within the sector. These concerns highlight the urgency of resolving pressing issues and considering potential impacts on the wider recruitment industry.

In Summary:

The UK government’s consultation on non-compliance in the umbrella company market demonstrates its commitment to addressing employment rights and tax issues within the sector. Through measures such as defining umbrella companies, introducing regulations, and reassessing incentives, the government aims to ensure fair treatment of workers, create a level playing field, and protect taxpayers. While the industry’s response to these proposals has been varied, the government will carefully consider feedback received during the consultation process to shape effective policies that strike a balance between regulatory oversight and supporting a thriving and compliant umbrella company market.

Need help?

If you have any questions please do contact Marie Pegram on 01462 687333 or by email

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