In a competitive market, there are plenty of umbrella companies advertising their services to contractors and freelancers in the UK. However, are the companies reaching out to you compliant with HMRC legislation, or are they unethical and promoting tax avoidance? Compliance is critical and we explain why.

Some umbrella companies are compliant, some umbrella companies are tax avoidance schemes

There are dozens of reliable and compliant UK based umbrella companies out there. However, for every compliant provider, there appears to be a non-compliant one trying to encourage contractors and freelancers to engage in tax avoidance.

The importance of using a compliant umbrella company

The 2019 Loan Charge is a piece of legislation that HMRC recently introduced. To summarise – if a contractor or freelancer has engaged with a tax avoidance scheme since 1999, HMRC can retrospectively punish them and demand every penny of the unpaid tax.

Unfortunately for affected contractors and freelancers, it doesn’t matter whether they avoided tax deliberately or by mistake – HMRC will still demand every penny of unpaid tax, without warning.

This is why you should never engage with a tax avoidance scheme. Just because a scheme is currently not known to HMRC, what happens if it is discovered in 10 years’ time? You may well be required to pay back years of underpaid tax in one go.

How to identify a compliant umbrella company

Compliant umbrella companies will offer you a realistic take home pay figure because you will be paid in a very similar way to somebody in full-time employment (PAYE). Look out for the following because they’re blatant signs of tax avoidance companies:

  • They offer you up to 90 percent of your take home pay
  • They use phrases like “pay less tax” and “IR35 compliant”
  • They’re not located in the UK. Instead, they are based in known tax havens such as the Channel Islands and the Isle of Man
  • They refer to their service as “better than PAYE”
  • They state that their offerings are “legal”
  • They are not accredited by well-respected industry bodies such as Professional Passport.
  • HMRC has issued them with a Scheme Reference Number (SRN), meaning they are investigating the company as potential promoters of tax avoidance
  • They do not pay you a simple salary, and instead reference loans and split payments

To summarise…

So, to summarise, are umbrella companies compliant?

Providing you have done your research and choose a compliant umbrella company – you have absolutely nothing to worry about. Umbrella companies make getting paid as a contractor of freelancer easy and many offer a heap of added extras.

Umbrella Company UK

Umbrella Company UK is fully compliant with HMRC legislation. We have never offered a tax avoidance scheme and we never will. As a proud accredited partner of Professional Passport, we are annually audited to ensure our internal processes are transparent and follow all HMRC guidelines. Therefore, you can be assured you’re in the safest hands with us as your chosen umbrella company.

Registering with Umbrella Company UK is very easy and can be completed in a little over 10 minutes. Once you have signed up, you’ll have access to your own Account Manager, Employee Benefits, free £25 million insurance, Same Day Faster Payments, and more!

To find out more information about us, please give our friendly and professional team a call on 01707 669023 or complete the short form on this page.

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