The Low Incomes Tax Reform Group (LITGR) has added its voice to calls for the Government to introduce regulation for umbrella companies.

Umbrella companies are businesses that regularly take on agency workers and contractors as their own employees and are therefore required to deal with pay, tax and other employer obligations.

However, some umbrella companies, increasingly used by low-income workers, have come under fire for allegedly not complying with some of these obligations.

Calls from LITGR, an initiative started by the Chartered Institute of Taxation, come days after draft policy was submitted to the Treasury and Department for Business, calling for a range of reforms, including:

• the appointment of a director of labour market enforcement
• consultation about whether current legislation is up to par
• identification of whether a single enforcement body is needed or if the remit of the Employment Agency Standards Inspectorate needs expanding.

Victoria Todd, head of LITGR, said:

"There was the furore about an umbrella withholding holiday pay from workers, the loan charge APPG's report linking umbrella companies to disguised remuneration and now concerns about the use of mini umbrella companies.

"Added to the negative practices by non-compliant umbrella companies highlighted in our own recent report, it is clear what the problems are in this area and that some action is needed".

The Government previously had set out a number of proposals but is yet to take any of them forward.

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