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Government to legislate umbrella company changes

Umbrella companies are to be defined in legislation, with regulation expected in due course. The Government also intends to address concerns around abuse by shifting responsibility for PAYE.

The Treasury has published the UK Government’s response to the consultation ‘Tackling non-compliance in the umbrella company market’ which ran across summer 2023, noting that ‘timely action in the umbrella company market is imperative to protect the most vulnerable workers’. Key points to note include:

1. •

   the Government intends to legislate (via amendment to the Employment Rights Bill) to bring umbrella companies within the definition of employment businesses and to be subject to regulation accordingly (with further consultation expected)

2. •

   where an umbrella company is used in a labour supply chain to engage a worker, the Government is to move responsibility to account for PAYE from the umbrella company that employs the worker to the recruitment agency that supplies the worker to the end client. Where there is no agency involved, responsibility will sit with the end client. These changes