In answer to the question ‘does an HMRC approved umbrella company exist,’ the short answer is no.
This is due to the fact that every single umbrella company out there is classified as any other type of employer by HMRC. For this reason, HMRC has explicitly stated that it does not approve some umbrella companies over others.
Some umbrella companies state that they are HMRC approved as a marketing stunt designed to capture the contractor’s attention.
For this reason, it's essential to instead look at the range of the services and benefits the umbrella company can offer you, not at whether they are HMRC approved or not.
That being said, although an umbrella company can’t be classified as HMRC approved, they can be classified as HMRC compliant or not.
The majority of umbrella companies that exist are HMRC compliant, however, just as in any industry, there are a few that are not. This means it's key that contractors know what to look out for in order to avoid working with an umbrella company that isn't HMRC compliant, as this can be particularly damaging to the contractor.
To help, next, we will look at how to spot an umbrella company that isn't HMRC compliant.
If a contractor is found to be working with an umbrella company that isn’t HMRC compliant, it will be them, and not the umbrella company, that will face penalties and a bigger tax bill. This is because it is the sole responsibility of the contractor, and not the umbrella company, to meet their own tax obligations.
Thankfully, HMRC has published a guide to help self-employed workers such as contractors identify companies that are not compliant.
Red flags contractors should look out for include:
Umbrella companies that process only a part of your salary through payroll
The first factor to act as a warning sign is an umbrella company that offers to process only a part of your salary through the payroll, giving you the remainder of the amount directly.
In these cases, only the fraction of your salary which has been put through the payroll is subject to tax, despite the fact that the whole amount should be. This is classified as tax avoidance and means that the contractor hasn’t paid the correct levels of tax.
As we have mentioned, it will be the contractor that is made liable for this, not the umbrella company. If you are found out, you will face a bigger tax bill and possible fines by HMRC.
Umbrella companies that claim you can keep up to 95% of your wages
Another red flag to look out for is an umbrella company that claims the contractor can keep 80-85% of their wages whilst remaining tax compliant.
This is not the case since the basic rate of income tax is 20%, and National Insurance contributions are also taken from your earnings.
Umbrella companies that pay the contractor through either loans, credit, or investment payments
Some umbrella companies will offer to pay the contractor through a loan, credit or investment payment because these avenues are not subject to income tax.
Again, although these umbrella companies will state that this is a legitimate way to pay the contractor, HMRC has said this counts as tax avoidance. So, if you are caught, you will be made personally liable for not paying your tax.
Umbrella companies that route payments through other companies
Finally, the last thing to look out for in an umbrella company that isn’t HMRC compliant is one that routes payments through several other companies before it ends up in your pocket.
So, now you know what you're looking out for, how can you find an HMRC-compliant umbrella company?
We know that no contractor wants to get caught out by the small number of illegitimate umbrella companies out there. That's why many look for a list of HMRC approved umbrella companies. Yet, as we've already stated, this doesn't exist.
However, by looking out for the red flags we have outlined, you should be able to quickly and easily spot an umbrella company that isn’t compliant, meaning you can steer clear.
Here at Umbrella Supermarket, we only ever work with trusted, HMRC approved umbrella companies, so you can rest assured you’re only ever choosing the best, most reputable umbrella companies out there.
With our handy contractor calculator, we let contractors compare umbrella companies in a matter of just seconds. Input your details, such as your contractor preferences and daily rate, and we will show you a list of the best-suited umbrella companies for you.
We highlight what contractors will receive in return from the umbrella company, including services and benefits, and will even show you what your payslip will look like under the chosen company. In essence, we make it easy for contractors to find their perfect match. To see how we can help you, why not give it a go for yourself today?
Any contractor considering switching to an umbrella company will want to know how to find the best provider to work with.
Although you could spend your precious time and energy searching the web for the best umbrella company, there is an easier way – using an umbrella calculator.
In this guide, Umbrella Supermarket explains why every contractor should use an umbrella calculator in 2021.
If you are considering contracting you will need to decide on PAYE or umbrella.
It can be a difficult decision to make and contractors will inevitably be questioning which option will be the best for them.
To help every contractor get on the right track for them, in this guide Umbrella Supermarket looks at PAYE vs umbrella, outlining the key differences and how this will impact you.
There are many reasons that contractors across the UK opt to work under an umbrella company.
Umbrella companies offer an easy way to contract and remove the need for the contractors to worry about the burdens of admin, finances, tax and IR35, all things that limited company contractors have to deal with.
For this reason, many contractors will be weighing up their options and questioning whether it is worth using an umbrella company in 2021. To help make the decision that little bit easier, Umbrella Supermarket has put together this guide on the pros and cons of using an umbrella company.
Any contractor that is considering operating through an umbrella company in 2021 will need to understand Umbrella Company fees - from why an umbrella company charges fees, how they are paid to how much the contractor will pay.
In this guide, Umbrella Supermarket answers those all-important questions to help every contractor know exactly where they stand when it comes to umbrella company fees.
If you’ve made the decision to contract through an umbrella company in 2021, you will next need to find an umbrella company that’s right for you.
After all, there are lots of umbrella companies out there, so how do you know which one to choose?
To help you find the best umbrella company for you, in this guide Umbrella Supermarket outlines what makes a good umbrella company, so you can rest assured you’re making the right move.
One of the many advantages to operating through an umbrella company for contractors is that they become an employee of their chosen provider.
In turn, this means that the contractor will be automatically enrolled onto the umbrella company’s workplace pension scheme.
To help contractors find out more about umbrella company pensions Umbrella Supermarket has put together this handy guide.
If you are considering contracting through an umbrella company you will naturally have questions and queries over how they work.
After all, making the move to umbrella can be a big step for contractors. To help, in this guide Umbrella Supermarket explains how to get started with an umbrella company and share our top tips for using one in 2021.
PAYE or umbrella is a question asked by every contractor. Which one you opt for will have a big impact on your contracting career and lifestyle. So, it's important to make the right decision for you.
To help makes things a little bit easier, Umbrella Supermarket has put together this guide on PAYE or umbrella, outlining the key differences between each, to help you make the best and most informed decision for you.
One of the many benefits to working through an umbrella company is that you will receive holiday pay as well as a range of other statutory benefits including sick pay, maternity and paternity pay.
To find out more about umbrella company holiday pay, and how to calculate how much you will be entitled to, Umbrella Supermarket has put together this handy guide.
Contractors must make several decisions throughout their contracting careers. One big decision contractors have to make is how they will operate.
One way that contractors can work is through an umbrella company.
Umbrella companies have become an increasingly popular way to contract in the past few years, offering many benefits to the contractor. But, how do you know whether this option is right for you?
To help every contractor make the right decision for them, in this guide, Umbrella Supermarket explains when not to use an umbrella company.
If you're considering making the leap to contracting, you will understandably want to know how much you will have to pay in umbrella company costs. After all, this amount comes directly out of the contractor’s pocket, so it’s important to be clued up on how much you should expect to pay.
To help contractors, in this guide Umbrella Supermarket answer the all-important question of how umbrella companies cost in 2021.
Every contractor faces the decision between PAYE or umbrella, but how do you know which is the best option for you?
After all, PAYE and umbrella both have key differences, meaning contractors should do their research to find the best path for them.
Thankfully, Umbrella Supermarket is here to help. In this guide, we take a look at PAYE vs. umbrella, explaining what you should know before making the all-important decision.
