Warning for agencies using umbrella companies

HMRC has published Spotlight 64 warning that it is aware of some umbrella companies that use employment and recruitment agencies to promote their tax avoidance schemes.

These schemes are targeted at individuals such as contractors and other temporary workers who may not know the risks of using them. HMRC says that agencies should check carefully the details they are given by umbrella companies about their products and consider taking independent professional advice if they are unsure if an umbrella company they plan to use is compliant.

HMRC highlights some of the signs that suggest a company might be operating an avoidance scheme such as unusually high financial incentives and different versions of payslips provided to the agency and worker. It may also be based outside the UK.

HMRC states: ‘Most of these schemes do not work and are successfully challenged by HMRC in the courts and...