There are dozens of compliant and reliable umbrella companies in the UK but sadly, there is a growing number of non-compliant providers too. Never be tempted to use a non-compliant umbrella company (tax avoidance scheme) because the repercussions from HMRC could be severe. When looking for an umbrella company, it is always worth remembering the famous phrase – “if it is too good to be true, it probably is!”
With the basic rate of income tax being 20 percent and the rate of Employee National Insurance Contributions (NIC) being 12 percent, it goes without saying that companies offering up to 90 percent take home pay retention are dodgy! As a UK tax payer, you are obligated to pay your fair share of tax and NICs, just like permanent employees.
When using a compliant umbrella company, you should expect to legally retain between 65 – 75 percent of your take home pay – and no more! Any company offering you more is a tax avoidance scheme and you could find yourself in serious trouble with HMRC.
A majority of tax avoidance schemes are located outside the UK in known tax haven countries such as the Isle of Man, the Cayman Islands, the Channel Islands, and more. If you are a UK tax payer, it should instantly ring alarm bells if you’re considering using a payroll company that is not based in the same country that you work. Don’t get fooled but the convincing companies out there and always do your research – thoroughly.
It’s common for non-compliant umbrella companies to use odd, inaccurate and meaningless phrases, including:
- Better than PAYE
- IR35 Compliant
- IR35 Safe
- HMRC Approved
- Tax Solution
If you see any of the above, be very wary!
A lot of non-compliant umbrella companies will pay you unusually. For example, one of the most common tax avoidance schemes out there is loan schemes. These companies will pay contractors through a combination of salary and a loan that they are not expected to pay back. This is obviously not how you should be paid so don’t engage with such a company for your pay!
If you use a non-compliant umbrella company, HMRC could seriously punish you. A piece of legislation called the 2019 Loan Charge means that if you have used a tax avoidance scheme since 1999, you could retrospectively be required to pay back tax if HMRC believes you have not paid your fair share – even if you had no intention of misleading the taxman.
Churchill Knight Umbrella is fully compliant with HMRC and we are proud to be accredited by Professional Passport – a leading industry body. We are audited annually to ensure our processes are compliant and up to date with the latest rules and regulations issued by HMRC. Therefore, when you register with Churchill Knight Umbrella, you know you are in the safest hands.
To find out more information about Churchill Knight Umbrella and to request a free take home pay calculation, please complete the short form on this page or give our friendly team a call on 01707 871622.