Before to dive deep into this subject, it is important to state that there are many Compliant Umbrella Companies in the UK who operate at a very high standard and are trustworthy. There is no doubt about that. At the same time, there are also Umbrella Companies willing to be dishonest about how compliant they are to increase your take-home salary as well as their margin in the process. They make it possible by using tax avoidance schemes.
The first question you should ask yourself is: How can I make sure I use an Umbrella Company I can trust? How do I separate the good ones from the others?
There is no doubt in our minds that the first step is to look for an Umbrella that has successfully secured an accreditation.
An Accreditation is awarded to Umbrella Companies who are able to prove they operate compliantly with HMRC rules and regulations. They are audited on their practices and processes, unlike all others.
To give you an example, unlike Umbrella Companies, Banks and insurance companies are regulated by the Prudential Regulation Authority (PRA), and the Financial Conduct Authority (FCA). It helps you trusting the organisation you engage with.
The role of Accreditation bodies is to audit Umbrella Companies to make sure that the Umbrella you choose to send the right amount of tax to HMRC on your behalf.
In a nutshell and to make it very simple, there are two kinds of Umbrella Companies. The Accredited ones and the non-accredited ones! It doesn’t mean NON-Accredited Umbrella Companies are not compliant, most of them probably are… it is just that they only have their words to prove it.
Our point is simply: Be careful! The consequences could be pretty disastrous for you and your love ones. No-one wants to receive a letter from HMRC asking for £50,000. Unfortunately, it has been an experience some contractors have faced.
This is the sole reason why FindYourUmbrella only shows Accredited Umbrella Companies.
It is not surprising that Accreditation bodies are broadly criticised by most non-compliant Umbrella Companies who keep selling high take home opportunities through tax avoidance schemes.
However Accredited Umbrellas are increasingly gaining importance especially since IR35 has been applicable to the public sector in April 2017. Over the course of 2020, End-clients and managed vendor services in the public sector started auditing recruitment agencies to make sure their contractors are using Accredited Umbrella Companies only.
There are several accreditations. The largest independent assessor of payment intermediary compliance is Professional Passport. The CEO, Crawford Temple, agreed to talk to us about his view on the industry: