Why choose a compliant Umbrella company?

Why choose a compliant Umbrella company?

Oct 19, 2018

When looking for an Umbrella company to work with, it’s understandable that you would be attracted to promises of a high take-home pay.  But appearances can be deceptive – if an Umbrella company suggests you can keep 80% or more of your gross pay, it’s likely that all is not entirely above board.

Recently,  HMRC issued a stark warning against the use of no-compliant Umbrella companies, typically those which claim to enable you to take home 80% or more of your gross pay.

Often the companies that use illegitimate arrangements tell the contractor that their payments will be made in the form of a non-taxable loan or credit arrangements.  As far as HMRC is concerned, these payments are actually no different to normal income and should be subject to tax and National Insurance contributions.

Warning signs

HMRC advises proceeding with caution if an Umbrella company promises that you can keep 80% or more of your wages.  You should also be careful if they say that only a fraction of your salary will be paid through payroll and subject to PAYE as this indicates you are only paying tax on some of your income.  Other warning signs are payment by loan, credit or investment payment and if the payment is routed through various companies before it reaches you.

“These companies may tell you they are compliant with tax rules but you shouldn’t rely on this. These companies do not always explain the risks of using these schemes or try to hide the fact they involve tax avoidance…These arrangements leave you at risk because you are ultimately responsible for your tax affairs and for paying the correct amount of tax and National Insurance contributions. These types of arrangements are likely to result in you paying additional tax, interest and perhaps penalties, and are never HMRC approved.” HMRC website.

Compliance with the rules set by HMRC is always high on our agenda. Whether you work with us as an employee of our Umbrella company or whether we support you as a limited company or CIS contractor, our systems and processes are designed to ensure you receive the best take home pay while working within HMRC’s rules.

You can find out more about our Umbrella services here.


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