HMRC defends decision to only refer contractors to FCSA accredited umbrella companies and claim it’s because of a supplier

HMRC defends decision to only refer contractors to FCSA accredited umbrella companies and claim it’s because of a supplier

In a recent article posted on Contractor UK, HMRC defends itself for exclusively referring contractors to umbrella companies that have an accreditation from the Freelancer and Contractor Services Association (FCSA) and claim it’s because of a supplier. From our perspective – surely this is proof that HMRC values the FCSA? After all, it’s our opinion that exclusively referring contractors and freelancers to FCSA accredited payroll providers is a sensible course of action. We’ll explain more below, including why you should only use the services of a compliant umbrella company (and one with a reputable accreditation from a well-respected professional body).

HMRC spokesperson confirms decision to refer contractors to FCSA accredited umbrella companies is a choice made by “supplier”

An HMRC spokesperson told Contractor UK that HMRC does not favour any professional body or association. The spokesperson said:

“The choice to engage only umbrella companies that are FCSA-accredited is a choice made by our supplier.

Therefore, HMRC is not endorsing the use of any particular association or body — or their viewpoint, or breaking any rules.”

The calls for regulating the umbrella company sector have never been louder

While most umbrella companies are compliant and provide a high-quality service, it’s no secret that some are disguised remuneration and tax avoidance schemes. Engaging with a non-compliant umbrella company can have serious consequences for the entire supply chain – especially temporary workers and the body behind the referral.

Recently, there have been some high-profile cases of non-compliance and security breaches within the umbrella company sector. As a result, there have been multiple calls from stakeholders for the government to regulate the umbrella company marketplace. During the coronavirus pandemic, there was mini umbrella company fraud where criminals set up non-compliant umbrella companies to help recruitment agencies avoid tax. There has also been a notable rise in unethically motivated payroll providers. For example, an FCSA accredited umbrella company has recently been accused of retaining the holiday pay of its employees – an appalling act if true.

As well as clear-cut non-compliance, some umbrella companies have recently been plain unlucky and have suffered from cybercriminal activity. For example, the well-known umbrella company Giant Pay was recently forced to temporarily shut down internal systems in response to a severe cyber security threat, and they were not alone. Unified Payroll also announced security issues and has since quietly left hundreds of worried umbrella employees in limbo. The Team here are was recently contacted by a concerned Unified Payroll employee. This individual hadn’t been paid for multiple weeks and couldn’t get hold of anyone at Unified Payroll. This situation is extremely unfortunate, and we sincerely hope the matter is resolved as soon as possible.

Referring temporary workers to an FCSA accredited umbrella is a responsible approach

HMRC has issued helpful online information for temporary workers and the supply chain about umbrella companies. In guidance available on the government’s website, Working Through an Umbrella Company, HMRC explains how compliant umbrella companies work and what workers and the supply chain should look out for. It’s well worth a read, and we found it interesting and helpful. HMRC is happy to explain how umbrella companies work, but they’re reluctant to issue advice to help the supply chain pick specific umbrella companies and payroll providers. Surely this is to protect themselves in case a provider they recommend acts unethically in the future?

HMRC has claimed it’s one of its suppliers who insist contractors are referred to FCSA accredited umbrella companies, and they have no say or preference themselves. Hats off to the “supplier” because they have a responsible approach to sourcing external payroll providers.

The Freelancer and Contractor Services Association (FCSA) is the UK’s leading professional body dedicated to ensuring the supply chain of temporary workers is compliant and ethical. They work tirelessly to protect contractors and freelancers and help the government with legislation and tax issues affecting the UK’s self-employed. The FCSA has stringent Codes of Compliance, and they’re available to see online. The Codes of Compliance are frequently updated to reflect new goings-on in the industry. The FCSA’s commitment to transparency is exemplary.

Companies that obtain FCSA accreditation must undergo a series of assessments and audits from independent professionals to prove they operate compliantly and in accordance with HMRC’s rules and regulations. And, once FCSA accreditation has been earned – a company cannot take their foot off the gas. Every year, they must undergo a strict audit to ensure they’re maintaining the highest compliance standards.

Who would have an issue if HMRC did exclusively refer contractors to FCSA accredited umbrella companies?

There are bodies out there who would have issues with HMRC if they decided to refer its contractors exclusively to FCSA accredited umbrella companies. We’re not entirely sure why.

The FCSA does everything possible to ensure its members provide compliant payroll services to temporary workers. And, by constantly amending its Codes of Compliance to adapt to the ever-changing industry, they’re doing everything they can to provide transparency at a time where it’s needed more than ever before.

Some third parties hold a grudge against the FCSA and are constantly pointing out floors in how they do things. For example, the FCSA was recently under attack by third parties because of suspect wording in their Codes of Compliance. Rather than contact the FCSA and seek a quiet answer, the FCSA was publicly grilled with accusations that they were okay with members operating offshore arrangements. Although the FCSA was right to update its Codes of Compliance in response to clarify that offshore and non-compliant umbrella companies are not eligible to obtain FCSA accreditation, the accusations were unnecessary. The people behind the public grilling of the FCSA deliberately set out to undermine the FCSA’s hard work and commitment to compliance within the industry – in our opinion. Accusations were made to try and damage the FCSA’s reputation

Let’s not forget Professional Passport

The FCSA isn’t alone. Two professional bodies set the standards for compliance within the temporary payroll sector, and the other is Professional Passport. Our advice to our readers is to use an umbrella company accredited by either the FCSA or Professional Passport.

Top 10 umbrella companies

If you’re looking for an umbrella company you can trust, you’ve come to the right place. We’ve created a list of our top 10 umbrella companies, and they’re all accredited by either the FCSA or Professional Passport. Please check them out now – some have special offers at the moment.

The Complete Umbrella Company Guide - Download Now

Click here to see our top 10 umbrella companies!

Scroll to Top