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Tue 26th Oct 2021 The majority of umbrella companies in the UK operate ethically and honestly, ensuring that all statutory deductions are made and that the contractor is being paid the accurate amount. However, many businesses have “hijacked” the term “umbrella company” and have used it to promote their non-compliant solutions to benefit themselves.

As a contractor, using non-compliant models could leave you facing large, backdated tax bills from HMRC. For recruitment agency directors, criminal prosecution for failing to prevent tax evasion under the Criminal Finance Act 2017 could be the reward for turning a blind eye to compliance.

With all of this said, it must not go without saying that it can be extremely tricky to spot a non-compliant umbrella company.

What To Look Out For:

Mini UmbrellasThe scheme promoter sets up many limited companies, with a small number of workers employed by each company. These schemes take advantage of the Employer’s National Insurance (NI) allowance for small businesses and flat rate VAT. What to look out for: The employer on your payslip not matching the scheme promoter, newly incorporated business, and/or the employer’s NI missing.

Loan Schemes

As a result of scheme promoters taking advantage of the public sector IR35 reforms in 2017, they aimed to promote generous take-home pay by paying some of the worker income as a ‘loan.’ Little did the worker know that the tax was unpaid, and many workers have subsequently faced large tax bills that are eye-watering from HMRC.What to look out for: Take home pay appears too high, and/or newly incorporated business, failed or has multiple directorships.

Offshore Arrangements

Luckily, most people understand that ‘offshore’ frequently spells trouble. While not all offshore arrangements are non-compliant, those aimed at the temporary labour market often fall on the side of tax evasion rather than avoidance. The correct UK tax is unlikely to have been paid, leaving the worker at risk of future tax bills and any recruitment agency at fault for allowing tax evasion to occur.What to look out for:Non-UK based companies and/or take-home pay appears too high.

Why NWM Is A Great Umbrella Company

With 20 years of experience working with contracts, NWM is ideally placed to help you enjoy all the safety of being employed while also maintaining the flexibility and freedom of moving from assignment to assignment. With us, you’ll get paid holiday, as well as be covered by comprehensive insurance policies to ensure you’re safe and have the right level of protection. We will give you complete clarity by sending you regular texts and emails that will ensure you’re kept up-to-date. Plus, you’ll have 24/7 access to your online account which provides all information on your payments and tax contributions. We are FCSA accreditation which is recognised as the industry’s compliance gold standard. Accreditation is awarded to umbrella employers who can demonstrate the highest industry standards.

NWM can provide you with the exact level of support you need, get in contact today!

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