The FCSA has come under more scrutiny by a “well-respected” online source of information for IT contractors, and we wanted to explain the situation. Apparently, the FCSA is happy to endorse non-compliant, offshore umbrella companies. This simply isn’t the case – and it’s accusations like this that do far more harm than good for an already fragile industry. Please don’t take everything you read as gospel. Keep reading for more information about the accusations, the FCSA’s response, and how stakeholders have reacted.
Overview
The Freelancer and Contractor Services Association (FCSA) is the UK’s leading professional body. They are committed to ensuring the supply chain of temporary workers is compliant with UK tax law and regulations. The FCSA also prioritises protecting temporary workers by promoting the best practice amongst its accredited members.
Earlier in the year (March 2021), the FCSA updated its Codes of Compliance. This is not uncommon, as the FCSA frequently updates its Codes of Compliance to respond to changes in the industry and make them more robust. However, several months later, Computer Weekly has finally noticed the updated Codes of Compliance, and they’ve released an article that could be misinterpreted quite easily.
As a result, the FCSA has issued a statement expressing their disappointment at the accusation and said that “no evidence of non-compliant behaviour against an FCSA member has been provided to the FCSA in relation to these recent accusations”.
What are the accusations?
According to Computer Weekly, before the FCSA updated its Codes of Compliance in March 2021, accredited UK-based providers (umbrella companies) were not allowed to offer any offshore arrangements or structures. However, after the amendments, “the revamped Charter states they now can, provided their offshore operations do not make up more than 25% of their business”.
The article on Computer Weekly does include quotes from Phil Pluck, the FCSA’s CEO. Mr. Pluck said:
“[The] FCSA recognises that companies in all sectors of the UK economy now have business to business relationships outside of the UK, particularly in back office functions and with contractors who have multiple work locations.
In order to allow FCSA members to remain agile, and to reflect the international nature of the whole supply chain, the FCSA has always allowed companies within its membership to operate up to 25% of its operations outside of the UK. Not to do so would be anti-competitive.”
Mr. Pluck also mentioned that the FCSA’s Codes of Compliance state that all members must have 75% of their organisations operating in the UK. He added:
“This ensures that the FCSA member is a UK tax resident and subject to UK employment law, thereby protecting the contractor and supply chains and allowing the FCSA to assess those companies against UK legislation as well as the enhanced best practice standards that sit within both our codes of compliance and our Charter.”
Also in the comments to Computer Weekly, Mr. Pluck said the FCSA’s Charter has “simply been revised to reflect the extensive protection provided by the Codes of Compliance to ensure that both contractors and the supply chain are giving the protection and assurance the FCSA badge of compliance brings with it”.
The quotes from the FCSA were included in the Computer Weekly article. However, the FCSA has since released a statement regarding the news article and inaccuracies. Please scroll down to see the FCSA’s response.
Offshore umbrella companies are a serious threat to the entire sector
In the umbrella company marketplace, any payroll organisation accused of being “offshore” is seen as a non-compliant provider with the intention of helping workers’ pay the correct amount of UK tax and National Insurance Contributions. Sadly, contractors and freelancers have been pushed toward offshore umbrella companies (often disguised remuneration schemes) by unethical recruitment agencies – often against their will or knowledge (for example, the recent mini umbrella company fraud).
Offshore umbrella companies pose a serious threat to the entire supply chain. Temporary workers could end up paying the wrong tax and National Insurance Contributions – resulting in a future life-changing fine. And, those responsible for facilitating tax avoidance could also be severely punished.
The government recently released new guidance for professional organisations that engage with temporary workers. The guidance, entitled ‘Check how to reduce your risk of using an umbrella company who operates a tax avoidance scheme’, is designed to help businesses make compliant referrals and avoid the risks of non-compliant umbrella companies.
The FCSA is committed to ensuring its members abide by the very highest compliance standards. There is absolutely no way they would ever endorse any umbrella company operating offshore and not in accordance with UK tax rules and regulations. Unsurprisingly, they were quick to defend themselves, and the FCSA’s official response to the Computer Weekly article is below.
The FCSA’s response to the Computer Weekly article
In a news article on the FCSA’s website, a formal response has been issued to the article that appeared on Computer Weekly. The article states:
“The FCSA is disappointed by the recent article contained within Computer Weekly which can be found here: IR35: FCSA defends Charter change that lets umbrella firms operate offshore setups (computerweekly.com)
The FCSA was created over 12 years ago to uphold the strongest possible ethical and operating standards. It operates via a set of published standards that are comprehensive and independently tested and provide the highest level of protection to the contractor and compliance assurance to the supply chain within the outsourced sector.
Our CEO, Phil Pluck has already commented within the article itself. But the article makes a number of inferences that are simply inaccurate. To be clear, the FCSA has never allowed its members to use, operate or promote any overseas or UK arrangements/schemes that change the lawful tax treatment of money earned in the UK. This has always been enshrined within the FCSA Codes of Compliance and always will be. The FCSA Charter has simply been amended to be in line with the existing FCSA Codes and we would encourage anyone who is interested to look in detail at both.
It is clear that within the FCSA Codes that members have never been able to use or promote offshore models to contractors (A8 of the FCSA Mandatory Code confirms this). FCSA companies must be registered in the UK, be subject to all UK employment legislation and be fully compliant with UK tax regulation.
We remain disappointed that the FCSA finds itself under attack for simply promoting and implementing the very highest standards of compliant and ethical behaviour within the sector and we remain confident that our comprehensive Codes and Charter give the contractor and supply chain the greatest assurance of compliant, legal and ethical choice. We also note that recent accusations against the FCSA and its members are just that. No evidence of non-compliant behaviour against an FCSA member has been provided to the FCSA in relation to these recent accusations.”
Have you read the FCSA’s Codes of Compliance?
Before anyone goes off on a tangent and starts labelling the FCSA “cowboys” and the industry as being like the “wild west”, have you actually read the FCSA’s strict Codes of Compliance? Please take a look for yourself. You’ll discover just how strict the Codes of Compliance are, and how accountants, CIS payroll providers and umbrella companies must prove they’re fully compliant with UK tax laws before gaining FCSA accreditation.
When the FCSA updated its Codes of Compliance in May, they released a news article with links to the updated documents. The FCSA promotes transparency, and the amendments were handled responsibly.
Unsurprisingly, Professional Passport does not have any sympathy with the FCSA
Crawford Temple, CEO at Professional Passport, told Computer Weekly:
“This revelation that the FCSA is allowing its members to use offshore models is shocking. We have seen many reports of non-compliance operating in the sector and clearly offshore structures have come under close scrutiny along with other forms of disguised remuneration.
Our [umbrella] sector has come in for a lot of criticism of late and the news that the FCSA is permitting offshore structures will be damaging.
This news [of the Charter change] now reinforces the fact that Professional Passport is the only compliant standard that strictly prohibits any money being transferred offshore or workers being paid money from offshore.
Such malpractice provides a serious risk to the entire supply chain, contractors, agencies and hiring clients, and we vehemently oppose it.”
Rather than show solidarity and support for the FCSA, Professional Passport’s comments do not show an ounce of sympathy. This has disappointed us because it would have been great to see solidarity between the two professional bodies. After all, ultimately, they’re both working towards the same objective.
Phrases such as “the FCSA is permitting offshore structures” could be interpreted differently depending on who is reading. It also implies the FCSA are happy to allow its members to facilitate tax avoidance (which certainly isn’t the case). The fact is that the FCSA does not endorse offshore umbrella companies and tax avoidance schemes!
It would be great if stakeholders were more responsible
Sadly, we live in a culture of blame. The FCSA frequently finds itself under attack, which is baffling when you consider they exist to promote transparency and compliance within the temporary workforce sector. The FCSA’s sole purpose is to fight for temporary workers and to ensure the supply chain operates compliantly with HMRC’s regulations. Why do so many people forget this?
The constant scrutiny being thrown in the direction of professional bodies trying to help the industry has got to come to a stop. It’s a serious issue that is causing far more harm than good. The umbrellacompanies.org.uk team frequently browse social media and contractor news sites for the latest goings-on in the industry. Ever since the coronavirus pandemic started, we’ve been disgusted to see that plenty of stakeholders (that claim to have temporary workers best interests at heart) launching smear campaigns against umbrella companies and professional bodies.
By starting imprecise campaigns that label the entire industry as unethical and dodgy, stakeholders will mislead innocent temporary workers and representatives in the supply chain. It’s a very cowardly way to behave.
Before you read something about the FCSA, ask yourself this – “can you trust the people behind the accusations?” Anyone who appears to have a personal vendetta against the FCSA doesn’t value genuine compliance within the industry. Many of the people behind such campaigns have severe issues with the government over the handling of IR35 (off-payroll changes). They are choosing to blame umbrella companies and the umbrella sector for malpractice when they’re more annoyed by the fact their businesses have missed out on being able to assist limited company contractors.
We’ve noticed one campaign in particular that criticises everything the FCSA has ever done – and ever will do! This type of “journalism” is quite frankly unacceptable. No surprise that a contractor accountant backs this campaign.
There is increasing demand for the government to regulate umbrella companies. Most of the parties calling for this claim the FCSA isn’t fit for purpose. This is extremely disappointing, and we think any government regulations should be modelled on the FCSA’s Codes of Compliance. It’s all very well demanding the government intervene, but how can anyone be sure this will help the situation? Take IR35, for example. You could argue that the government doesn’t truly understand how it works despite creating the legislation and have lost multiple tribunals in court. Would government regulations help the industry? We recently wrote an article backing government intervention – provided they work with the FCSA and Professional Passport throughout the experience.
If you represent a business that offers services to the UK’s temporary workforce and you’re unhappy with something the FCSA has done – have you considered contacting the FCSA first – before launching a scathing hate campaign online? You can find contact information for the FCSA here.
Choosing a compliant, UK-based umbrella company
If you’re a temporary worker looking for a compliant umbrella company, or you represent an employment agency and want to add a compliant umbrella to your PSL, we have some advice. We highly recommend you only consider using FCSA or Professional Passport accredited providers because these businesses have undergone extensive audits and assessments to ensure they operate compliantly with UK tax laws. These are the only professional bodies you should trust – despite a few dodgy umbrella company accreditations popping up within the industry.
Top 10 umbrella companies
Like the FCSA, we do not endorse or promote offshore umbrella companies and tax avoidance schemes! We make it our mission to educate our readers about the importance of ensuring they pay the correct amount of tax and National Insurance Contributions (PAYE).
The easiest way to ensure you’re using a reputable and trustworthy umbrella company is to choose one that is accredited by either the FCSA or Professional Passport. And, to make life even easier, we’ve collated a list of our top 10 umbrella companies. They’re all accredited by either the FCSA or Professional Passport, and some have special offers at the moment.
