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Labour denies tax avoidance focus on Umbrella companies

Posted by: Intouch | 09.10.14

Intouch Accounting

Labour denies tax avoidance focus on umbrella companies

Ed Milliband announced at the Labour party conference this year that if elected into power it would create a £2.5 billion NHS Time to Care Fund to salvage the National Health Service. Explaining where the money for this would come from he outlined that £1.2 billion would be generated with a new Mansion Tax on properties worth over £2 million; £150 million would come from a levy on the tobacco industry and £1.1 billion would be raised by quashing tax avoidance activities.

Are Umbrella companies a tax avoidance target?

One widespread rumour has emerged that one of the tax avoidance targets would be Umbrella companies. The suggestion is that the focus would be to prevent Umbrella companies being used as a way of avoiding tax and National Insurance contributions through exploitation of rules on travel and subsistence expenses and other ‘salary sacrifice’ arrangements. Some commentators suggest that if this happened it would put many Umbrella companies out of business. As this scenario would severely affect contractors who use these companies, this would be a huge blow to the sector.

The Labour party claims that as Milliband did not actually mention this point at the conference this rumour is just speculation. With this rebuttal it’s impossible to say whether this is an option that’s been the subject of discussion in private. It’s interesting though that such a specific rumour should have emerged. Umbrella companies have already been un-settled in recent times by changes to managed services company legislation as well as to the agency workers regulations. Both the Umbrella companies themselves and the contractors who use them would surely prefer a period of stability and certainty, rather than concerns that there may be more upheaval to come.

More support for the self-employed

Milliband told the conference that Labour stands firm in its intention to give more support to the self employed. As the number of self-employed has now reached 4.6 million and their contribution to the economy increases, the collective voice of this group is gaining strength. He labelled the current rights of the self-employed as 21st century discrimination and promised to level the playing field towards equal rights. Support and allowances would be given in areas such as obtaining mortgages and saving for pensions. Of course, any increase in support to the self-employed would be welcome news for Limited Company contractors.

As you will no doubt have noticed, currently all political parties are announcing their strategies ahead of the May 2015 general election. This gives a lot of food for thought for contractors regarding both their business and personal finances. As we all know, things can change a great deal in a few months. For now it’s a case of keeping a watching brief on points of business and personal interest to see what develops.


This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.