Warning for agency workers and contractors employed by umbrella companies (Spotlight 60)

Tuesday, August 30th, 2022

Genuine contractors and Agency workers are often offered work via so-called umbrella companies, whilst being headhunted by employment agencies and supplying their services to a different ‘end-user’. It can well be that these arrangements attempt to avoid tax. They do they this by treating some aspects as supposedly non-taxable, when they are not. They may also wrongly deduct sums which should be payable by others – such as Employers’ NIC – in order to wrongly attempt to reduce the tax burden on the end user. Such practices are illegal. Whether or not contractors are aware of this, each of us is responsible for paying the correct amount of tax’.

“Aidan Loy” – Legal Director Contractors for Justice

Many umbrella companies are compliant with the tax rules, but some use contrived arrangements that claim to allow agency workers and contractors to keep more of their earnings. These arrangements are tax avoidance schemes and most of them do not work.

Some umbrella companies benefit financially by using contrived arrangements like disguised remuneration to pay workers. For example, an umbrella company might want to claim that a payment is non-taxable to try to avoid paying employer National Insurance contributions (NICs) on it — currently 15.05% of the payment.

Using these non-compliant umbrella companies could leave you at risk of being involved in a tax avoidance scheme, and owing HMRC money, even if you did not set out to try to avoid tax.

Read the full article here: Warning for agency workers and contractors employed by umbrella companies (Spotlight 60) – GOV.UK (www.gov.uk)