Umbrella companies: can their claims of compliance be trusted?

Umbrella companies: can their claims of compliance be trusted?

Recruitment agencies that outsource their payroll functions to specialist accountancy service providers have been warned against unregulated umbrella companies. This follows reports that JSA Services owes £10.6 million to HMRC for outstanding PAYE and National Insurance Contributions among other things; while two other umbrella service providers – Albany and Sunday Solution – have left their clients’ contractors unpaid.

Adrian Marlowe, managing director of recruitment law specialist Lawspeed, told the Recruiter that because much of the umbrella industry remains unregulated, there are not enough checks and balances in place, which often leads to tax compliance failures.

“Where an HMRC investigation establishes that rules have been incorrectly applied by umbrellas, a demand for payment of correct levels of tax usually quickly follows.

“That can lead to an insolvency situation and the potential for the umbrella to simply fold. In those circumstances it is entirely possible that monies received in from agencies can be used to pay off secured creditors and HMRC before the worker gets a dime – leaving the agency to face the brunt of the worker’s complaints, and everyone in the chain unhappy.”

While recent events have raised question marks over the fidelity of firms like JSA Services, there are still a number of umbrella companies in the UK that can be trusted.

No risk of debt transfer

Organisations such as Atlantic Umbrella believe that self-regulation is the best way to provide clients with a service they can trust. To this end, Atlantic belongs to the A-EMC, a trade body comprising of umbrella companies.

Unlike other trade bodies, A-EMC is a non profit organisation. All its members are independently audited to evaluate both financial performance and their compliance; and A-EMC will only accept umbrella companies that demonstrate that all tax and contractor liabilities are paid when due.

Furthermore, all A-EMC members are strictly PAYE employment based companies. This is particularly important as PAYE employment based companies are exempt from the 2007 MSC legislation which means there is no financial risk to agents as there can be no tranfer of debt liability.

Atlantic Umbrella’s managing director Rudy Scheinost believes that compliance and security is “more than just a promise to secure business”.

“In addition to belonging to the A-EMC, my firm regularly submits itself to independent audit and we recently passed a SPA Audit performed by Lawspeed.

“Our contractors all know that we do not hold onto their money, as soon as funds are cleared from the agent, the contractors’ payments are made. A recent client satisfaction score of 97% pays testament to our fast and reliable service.”

Should you wish to discuss the implications of the JSA, Albany and Sunday Solution troubles or switch to Atlantic Umbrella, contact them on 0845 045 1021.

More information on the SPA Audit can be found at: http://www.lawspeed.com/recruiters/recruiter_solutions_and_agreements/spa_a_scheme_to_minimise_msc_risk.aspx?