Comparison and broker websites marketing umbrella companies are not always what they seem.
HMRC urges contract workers to seek advise before becoming employed by an Umbrella company to avoid problems due to unpaid tax and national insurance.
Warning signs to consider
Adverts for umbrella companies listed on comparison websites are not always legitimate. Look to see if the umbrella company has the following
· company name
· postal address
· company registration number
Some may have very basic web pages with little to no information. They may only have a registration form asking for your personal details to receive a quote. You should do some research to verify that it’s legitimate.
Non-compliant arrangements are sometimes called ‘advanced’ or ‘enhanced’ umbrella services and may come with statements such as:
· ‘We ensure you get the highest take home pay’
· ‘Retain 80% of your earnings after tax – safe and compliant’
· ‘Compliant tax efficient pay’
· ‘We only use HMRC compliant umbrella companies that are independently reviewed’
· ‘QC approved’
How these arrangements claim to work
Non-compliant umbrella companies use various arrangements to pay people for their services. The payments may not have tax deducted and could be through loans or payments sometimes described as:
· annuities
· fiduciary receipts
· credit facility
· shares
· capital payments or advances
· bonuses
Sometimes the umbrella company will ask the contractor to sign another agreement. This is as well as their employment contract. This could be with the umbrella company or a third-party entity or trust, based outside the UK.
This should not be necessary if earnings are fully taxed and is most likely to involve tax avoidance. This is because the contractor’s pay is being supplemented by an untaxed or undeclared amount, described as something other than earnings.
Quad offer 100% compliant Umbrella Employment for £15 a week