Industry concerns that the government was preparing to ban Umbrella Companies in the construction sector have been eased Treasury minister David Gauke.

Mr Gauke was responding to a written parliamentary question on this issue put to him by Guto Bebb, Conservative MP for Aberconwy. The Welsh Assembly recently voted to ban Umbrella Companies on all its construction projects.

The Treasury minister replied: “Umbrella companies have been a part of the UK labour market for many years and, when operated responsibly, provide a useful conduit through which payments, including tax, can be made. As such, Her Majesty’s Revenue and Customs (HMRC) are not taking steps to stop agencies using umbrella companies to manage the payroll function of companies within the construction industry.”

Mr Gauke went on to say, however, that the government remained concerned about the increased use of overarching employment contracts by intermediaries such as Umbrella Companies. These arrangements, he said, allowed some temporary workers to obtain tax relief on home-to-work travel expenses that is not available to other workers.

He added: “The government published a discussion document on 16th December 2014 inviting representations from interested parties to inform potential future action.”

A number of professional bodies have already made public their concerns about the prospect of blanket bans. The FCSA believes that such an approach tarnishes the reputation of entirely responsible and compliant Umbrella Companies that provide invaluable services to many in the UK’s contracting and freelancing community.

Revenue and Treasury officials have now met with more than 70 interested organisations from a range of sectors. The deadline for the discussion process is 10th February.

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