Non-compliant agencies – how do they work and how can you ensure you are within the law?

Last week, HMRC released guidance highlighting how agencies and umbrella companies continue to use tax avoidance schemes, masked as ways to increase your take home pay.

These agencies and umbrella companies promote arrangements which “reduce your tax liability” and allow you to keep more of your income. These arrangements mean that you are “ultimately responsible for your tax affairs and for paying the correct amount of tax and National Insurance contributions.”

What will I be told?


Non-compliant agencies and umbrella companies will pitch these arrangements to you as a way to reduce paperwork and earn more, and that these payments are non-taxable due to them being categorised as a loan, credit or something similar.

If the company you are in contact with tells you that you have to sign up to these arrangements in order to continue working with them, the advice from HMRC is to “seek independent professional advice so that you fully understand the options available to you.”

How do I know if I am a part of one of these schemes?


HMRC states that you should check if:

  • The company promises that you can keep 80%+ of your wages
  • Only part of your salary is paid through payroll and subject to PAYE
  • You are paid using a loan, credit or investment payment
  • The company claims that their payments are not subject to income tax or national insurance contributions
  • The payment is routed through various companies before it comes to you

What are the risks?


As these arrangements are tax avoidances schemes, you could end up paying additional tax and National Insurance contributions as well as interest.

What should I do if I’m involved in an arrangement such as this?


HMRC states, “If you think you’re involved in this type of arrangement, or have used one in the past, you should withdraw from it and settle your tax affairs with HMRC.”

Unlike other agencies who have been found using non-compliant umbrella companies, Pulse only uses companies that have undergone stringent checks by our team. We understand that you need choice, that's why we have over 60 for you to choose from. If you are concerned about any of the above, please contact us.

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