In this blog we explore ways in which you can spot the good guys from the rogue, to ensure you’re staying on the right side of the taxman.

How does an Umbrella Company remain compliant?

An Umbrella Company must carry out the following tasks in order to remain compliant:

• Deduct all relevant taxes from a contractor’s pay
• Pay the required tax to HMRC

Many Umbrella Companies and contractors follow guidance from The Freelancer and Contractor Services Association (FCSA), providers of accreditation to Umbrella Companies which follow and respect its Code of Compliance. This code has been designed and created with input from HMRC and the government department for Business, Energy and Industrial Strategy (BEIS), and is therefore widely considered throughout the contracting community as the industry gold standard for compliance. You can view a list of FCSA accredited Umbrella Companies here, where you’ll also find SG Umbrella.

How do you spot a non-compliant Umbrella Company?

Tax avoidance schemes can be easy to fall foul of, especially if it’s your first time contracting. Here are some of the top ways in which you can identify a non-compliant umbrella:

1. They’re offering sky high take home pay, usually in the region of 80% and above. If it sounds too good to be true, it usually is
2. They’re suggesting a convoluted payment method or disguised remuneration scheme which will go out of its way to disguise your payments as another thing, such as an offshore loan, in an attempt to avoid paying the tax due
3. They claim to be endorsed by HMRC. HMRC do not ‘approve, certify or accredit’ any singular Umbrella Company, nor do they endorse them. Therefore if an Umbrella Company claims to be ‘HMRC approved’, they’re 100% not
4. They advertise ‘non-taxable’ income. Other than your tax-free personal allowance, all other income is taxable. Therefore if an Umbrella Company is advertising non-taxable income, they’re using non-compliant ways to pay you

There are many other ways in which tax avoidance can happen within the Umbrella Company community, and the gov.uk website has a fantastic check list to help shine a light on non-compliant practices throughout the industry

What should you do if you find out your Umbrella Company is non-compliant?

As soon as you suspect your Umbrella Company to be operating through non-compliant methods, report them to HMRC. Alternatively you can view the current list of named tax avoidance schemes, promoters, enablers and suppliers here.

How can SG Umbrella help?

Here at SG we’re FCSA accredited, so from the offset you can rest assured, knowing there’s no tax avoidance schemes running behind the scenes. Whilst the amount of tax and National Insurance Contributions you owe to HMRC are standard, the level of service, advice and support you receive can change from umbrella to umbrella, and here at SG we’re proud to say our service is second to none. Our 5* Google reviews are a true testament to that, and we even let you pay into your preferred private pension at no extra cost. Simply get in touch with our team to find out more.

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