Recruiters urged to protect against umbrella company failures

Recruitment law specialist Lawspeed are urging recruiters to protect against umbrella company failures.  This follows reports that JSA Services, part of the JSA Group, owes £10.6m to HMRC and has entered into a voluntary arrangement, as well as two other ‘umbrella service providers’ who have left many contractors unpaid.  According to Adrian Marlowe, managing director of Lawspeed and chair of the Association of Recruitment Consultancies (ARC), the umbrella industry has few checks in place and is not regulated.

Here, at Vector we have been aligned with Lawspeed for over 10 years and we are very careful on which Umbrella Companies we work with. If we discover that a contractor is using an Umbrella Company who turns out not be providing them with the service expected, or are unreliable with their payments, we advise our contractors of their alternatives and will no longer work with such an Umbrella Company in the future. Although we do not recommend any particular Umbrella Company, we can offer advice on the most popular and the services that they offer.

The article published on Recruiter.co.uk, goes on to state the following;

....Lawspeed warns that while all umbrellas claim to comply, the issue of incorrect payment of expenses in particular is a current focus of concern for HMRC. “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.”

The full article can be found at http://www.recruiter.co.uk/1004271.article

We have information on our website about working through an Umbrella Company and also how to set up your own Limited Company, please visit our contractors section.
 
If you have any concerns or would like further advice, please contact me on 01892 771447 or email en@vector-uk.com

Emma Nicholson, Contracts Manager