The question has to be asked why after so many hours spent trying to provide valuable insight and feedback to HMRC why do they never listen?

With the Exchequer facing a black hole shortfall, I am at a loss why this obvious route to increased revenue is still being ignored.

It’s not too late and as we have said in our earlier articles, they can still implement these actions quicker to collect more monies for the Exchequer from NOW, and not wait until 2026. Waiting is likely to lead to a boom in these avoidance schemes with higher losses during the interim period.

Even if the proposed rules do come into effect from April 2026 there needs to be a plan on visible enforcement, which is a lesson that should have been learned by now. Without this, new structures and avoidance arrangements will continue to proliferate in the market.

So here is the independent AI analysis of our recommendations made in 2021 in our report which we have been campaigning on since, we were also campaigning on these points long before we published our report.

In June 2021, Professional Passport published “The Good, The Bad and The Ugly,” addressing non-compliance in the umbrella and payment intermediary sector. The report highlighted issues of non-compliance, transparency, and enforcement, proposing both short-term and long-term solutions to foster a more compliant and transparent market. In March 2025, HMRC released its response to the consultation on tackling non-compliance in the umbrella company market, outlining strategies to regulate umbrella companies and enhance tax compliance.

In 2021 Professional Passport’s report identified key challenges in the umbrella company sector:

• Complexity: The intricate nature of legislation led to unintended consequences, making it difficult for stakeholders to navigate the system.
• Transparency: Workers often lacked understanding of their arrangements due to the complexity and frequent changes in legislation.
• Enforcement: Existing enforcement strategies were ineffective, incentivising non-compliance and failing to support compliant entities.
   

To address these issues, the report proposed:

1. Short-Term Measures:

• Utilising Existing Data: Leveraging current data to identify and address non-compliance.
• Protecting Compliance Reviews: Ensuring the integrity of compliance assessments to maintain trust in the system.
• Enhancing Transparency: Improving clarity in operations to help workers understand their employment arrangements.
   

2. Long-Term Strategies:

• Simplifying the Tax System: Re-evaluating the tax framework to reduce complexity and unintended behaviours.
• Clarifying Employment Status: Providing clear definitions to prevent misclassification and associated issues.
• Implementing Regulation: Introducing appropriate regulations to oversee the sector effectively.
• Strengthening Enforcement: Enhancing enforcement mechanisms to deter non-compliance and support compliant entities.
   

HMRC’s 2025 Response
HMRC’s 2025 response acknowledged ongoing non-compliance in the umbrella company market, resulting in loss of employment rights for workers, distorted competition, and significant tax losses. The consultation sought stakeholder input on effective measures to address these challenges, aiming to improve outcomes for workers, ensure fair competition, and protect taxpayer interests.

Comparative Analysis
A comparison of Professional Passport’s 2021 recommendations with HMRC’s 2025 response reveals both alignment and missed opportunities:

1. Regulation of Umbrella Companies:
Analysis: Both documents recognised the need for regulation. Implementing such measures earlier could have mitigated some non-compliance issues currently being addressed.

2. Mandatory Due Diligence:
Analysis: Earlier adoption of mandatory due diligence could have deterred non-compliant practices and promoted a culture of accountability.

3. Transfer of Tax Debt:
Analysis: While both approaches aim to enhance compliance, earlier enforcement could have reduced the necessity for such measures.

4. Transparency and Worker Understanding:
Analysis: Enhancing transparency earlier could have empowered workers to make informed decisions and reduced exploitation.

Conclusion
Professional Passport’s 2021 report provided foresight into the challenges within the umbrella company sector and offered actionable recommendations. Had these suggestions been implemented earlier, they might have mitigated some of the compliance issues that HMRC’s 2025 response now seeks to address. Proactive regulation, mandatory due diligence, robust enforcement, and enhanced transparency could have fostered a more compliant and equitable environment, potentially reducing the need for the measures currently being proposed.