Ensuring Umbrella Company Tax Compliance

12 months ago by Mark Tuvey

Ensuring Umbrella Company Tax Compliance


Have you ever been offered a higher than normal take-home pay by an umbrella company? At a glance, it seems an attractive proposition. After all, who wouldn’t be tempted by the suggestion of earning more? 

Our advice though? Proceed with caution…An increase in the number of illegitimate umbrella companies has seen a recent rise in the number of contract workers facing penalties and additional hefty tax bills.

This is just one of the reasons why at OneTrue, compliance is our top priority. We pride ourselves on doing things differently and often speak with our clients, contractors and candidates about not just a genuine passion for the industry, but our exceptionally high standards when it comes to compliance.

Most of our employees have been in the staffing industry for many years and during this time, we’ve unfortunately witnessed various cases of umbrella company tax avoidance. We’ve come across workers who’ve been persuaded to use non-compliant umbrellas that promise higher pay. An attractive proposition maybe, but one that’s sure to cost you in the long term.

Illegitimate umbrella companies aren’t only an issue within the social care field. They affect thousands of people each year and the problem has recently led to the HMRC publishing guidance on UK umbrella companies, which included this statement:

“Most employment agencies and umbrella companies operate within the tax rules. However, some umbrella companies and agencies promote arrangements that claim to be ‘legitimate’ or a ‘tax efficient’ way of keeping more of your income by reducing your tax liability.”

The same guidance from the HMRC suggests that workers should question any umbrella company offering net take-home pay of 80% or more. Our advice would be the same: organisations proposing particularly high net earnings of upwards of 80% are likely to be non-compliant and should ring alarm bells with agency workers.

But how can you be sure that an umbrella company is operating legally in relation to tax? Well, a good start is to ask for a detailed breakdown of all your possible deductions before you agree to working with them. Admittedly, doing this, alongside other standard checks on a company can be both time and energy consuming.

That’s why, for our contractors, OneTrue offers advice on finding the best umbrella company for you. Perhaps even better than this though, we’re also able to offer discounted umbrella company fees with four different FCSA accredited umbrellas who will charge a consistently low fee of just £10 per timesheet.

We know it may be frustrating should we not permit your chosen umbrella company, particularly if you’ve found what appears to be a great deal. But, ultimately, compliance comes first for us. It’s part of our philosophy of doing things differently and for taking the hassle out of recruitment for our contactors and clients.

If you’re interested in learning more about the benefits of partnering with OneTrue, read more here or get in touch with us today.