3 Signs of a Non-Compliant Umbrella Company

It’s important to choose an Umbrella company like Workwell that takes its compliance responsibilities seriously.

All Umbrella companies must adhere to HMRC’s rules on tax. However, many Umbrella companies are popping up with too-good-to-be-true offers for contractors, promising reduced tax rates and 80%+ take-home pay. Unfortunately, contractors are lured in by these tax avoidance schemes disguised as ‘tax-efficient’ offers.

An Umbrella company must provide you with a clear and detailed illustration of how your pay is calculated and the profit margin that they will deduct for providing the service. Requesting a complete fee structure is a great way to identify how the Umbrella company arrives at your suggested take-home pay, and if they are acting compliantly.

As an Umbrella employee, you could be held liable for working under an Umbrella company who is participating in tax avoidance even if you’re unaware of the scheme.

Occasionally, a company will ask contractors to sign up to an ‘arrangement’ of this kind. However, most companies’ schemes won’t be this obvious, so it’s important you do your research and choose a compliant Umbrella employer.

There are a number of signs to look out for which would indicate that a company is not operating compliantly:

• Look into their jargon. Non-compliant companies operating tax avoidance schemes will often dress up their services with phrases about ‘legal opinions’ and ‘tax efficiency’ instead of an emphasis on compliance.
• If the company promises you 80, 90, or 95% of your wage, they’re most likely operating under a scheme. Usually, the basic rate of Income Tax is 20% plus National Insurance contributions. So 80% take-home pay is almost impossible.
• If only a portion of your salary on your payslip is paid through payroll and the rest comes through as ‘loan’, ‘credit’, or ‘investment’ – this is a sign of tax avoidance.

Compliance assurance with Workwell

We support thousands of contractors to work compliantly through our FCSA-accredited Umbrella company. We are founder members of the FCSA and are audited by independent experts every year.