Both DASA Umbrella and DASA CIS have passed their FCSA (Freelancer & Contractor Services Association) annual reviews which enables each company to display the coveted Accredited Member badge for another year (up to July 2024).

The processes and procedures deployed by DASA’s Umbrella and CIS payroll models were independently assessed by JMW Solicitors LLP and Saffery Champness LLP to ensure that each entity fully complies with the FCSA’s Code of Conduct and operates to the “required professional financial and ethical standards” demanded by the organisation.

Within the often-misunderstood confines of the contractor payroll world, the FCSA accreditation remains the ‘gold standard’ of compliance for umbrella companies. The fact that only 64 umbrella and 34 CIS providers are currently accredited members of the FCSA illustrates that the vast majority of providers have not volunteered themselves for the highest level of scrutiny within the industry. It is estimated that there are in excess of 800 umbrella companies currently trading in the UK which highlights the scale of the disconnect between assessed and non-audited providers.

The historically all-dominant Professional Passport (PP) organisation also provides accredited status for payroll companies via their ‘approved’ list, which currently features 70 umbrella and 15 CIS Gross Status providers as of September 2023.

Surprisingly, only a small number of payroll companies appear on both the FCSA and Professional Passport’s portfolio of accredited or approved members, with only a handful audited for both Umbrella and CIS models by each organisation. DASA Umbrella and DASA CIS are in the minority as they are accredited by both.

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Why Does Payroll Compliance Matter?

Even when taking all this into account, one can be forgiven for asking why on earth these compliance badges actually matter in an industry where the lion's share of payroll companies are not audited at all? The truth is that most of them carry on trading regardless and seem to attract enough temporary recruitment agency clients and assignment-based contractors to make a decent living irrespective of size or sector. If being an accredited member of either the FCSA or Professional Passport is considered so important, why are there so many non-audited payroll companies merrily operating in complete isolation of these esteemed trade bodies?

It is a tough question to answer, but many will claim that the FCSA and PP audits are not worth the paper that they are written on or that these bodies themselves have been tarnished by the much-publicised examples of non-compliant practices by some of their members. Without doubt, the reputations of each organisation have suffered over recent years and left a lingering sense of scepticism among those who do not appear on their once coveted lists of compliance providers.

Given both the cost and the time of undertaking either audit, one can appreciate how these acts of non-compliance splashed across the pages of the national press or on a plethora of contractor-friendly websites has undermined the trust in not just each organisation, but also in the actual validity and value of the audit process. Clearly, hundreds of umbrella payroll companies simply choose to ignore the concept entirely.

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Government Names & Shames Umbrella Companies

This is all very well and good until something goes wrong, which invariably means that a non-accredited provider has been caught promoting some form of tax avoidance scheme or not paying the contractors correctly (or at all in some cases).

Attempts by the Government over the past decade to regulate the industry have had some impact but have largely failed to root out unscrupulous providers and individuals who continue to delight in circumventing each new tranche of legislation purely for professional and personal gain.

Teams at The Treasury and HMRC are well aware of this and have stepped up their respective efforts to expose those perpetrators who have been exposed and find themselves added to the ever-growing “list of named tax avoidance schemes, promoters, enablers and suppliers”, as stated on GOV.UK

Tackling Non-Compliance in the Umbrella Company Market Consultation

At the time of writing, there are 57 payroll organisations ‘named and shamed’ on the Government blacklist, but one suspects this only represents the tip of the proverbial iceberg if anecdotal rumours are to be believed. The Government knows this too and have stepped up their efforts to clean-up the industry in the form of the ‘Tackling non-compliance in the umbrella company market’ consultation which closed at the end of August 2023.

Following a round of open seminars and roundtable meetings throughout the summer attended by teams from HM Treasury, HMRC and the Department for Business & Trade, one suspects that the Government now has enough information to introduce some form of regulation in the near future. Certain industry commentators suggest that an initial announcement will be made in the Autumn Statement due to be read in the Houses of Parliament on Wednesday 22nd November with new legislation introduced in the following April; such a timetable will be familiar to those who worked through a tightening of the Off-Payroll Working in the Private Sector (IR35) regulations in 2021.

Imminent Regulation of the Umbrella Company Market

With an election looming in 2024 and the Government still mired in a myriad of controversies, this schedule might seem ambitious, but the writing is clearly on the wall and some form of regulation for umbrella companies would appear to be imminent. Unlike many, DASA would welcome a clearly defined set of criteria that would distinguish compliant and non-compliant providers and make it easier to choose a compliant umbrella company, as we are proud of our transparent and morally responsible ethos which underpins our business.

One of the biggest commercial frustrations of operating in the contractor payroll market is when we lose business to known non-compliant competitors as potential clients choose to take the risk of partnering with providers devoid of any compliance credentials.

Despite this, our unwavering commitment to delivering a genuine outsourced payroll service to the assignment-based supply chain remains entrenched in the DASA DNA and we just hope that our values will be rewarded and recognised in the long term.

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