It is common in the UK that Employment Agencies do not to want to put contractors on their payrolls. This is to avoid PAYE related liabilities. To pay their wages, they therefore use the services of an Umbrella Company.
This is becoming popular with the enforcement of the IR35 legislation by HMRC.
However some of the Umbrella companies are registered tax avoidance schemes. HMRC monitors & investigates most of them & anyone associated with them for ‘bending the tax rules to try to gain a tax advantage that Parliament never intended’.But these schemes can be spotted easily;
*They promise 90% or more take home pay
*They do not give normal payslips (sometimes it doesn’t even say Payslip)
* They claim to be compliant (or approved) with HMRC
* They show you a Scheme Reference Number from HMRC
If their promises are too good to be true and they give you documentation that is not easy to understand, it is always better to ask a professional before HMRC starts investigating you also.
Our clients are always encouraged to contact us first before signing on the dotted line for Umbrella Companies in the UK.