How to spot a dodgy Umbrella companyovationsumbrella
As a contractor, the consequences of choosing the wrong company can be severe. HMRC recommends that all contractors should only use legitimate, UK-based payroll operations., there are a few obvious signs of a dodgy Umbrella company that can be easily spotted such as:
- Hidden fee’s in employment contract – Be wary of an employment contract with hidden fees. A good Umbrella employer would have no joining or leaving fee’s and would never charge for things like references and important documents such as a p45 at the end of your contract.
- No full breakdown of your calculations – A dodgy umbrella company may not provide you with a full breakdown of your calculations when wanting to join them. It is important to look for Umbrella companies that are transparent with their calculations, a full breakdown of your payment calculation should be provided with all the deductions being visible.
- No accreditation’s from supervisory industry bodies – The importance of accreditation from official industry bodies is huge as it gives an Umbrella company its credibility. An umbrella company with no accreditation at all is a sign that they are an untrustworthy company. The two main supervisory industry bodies are Professional Passport and FCSA.
- Loan schemes – You should avoid umbrella companies which show signs of tax avoidance schemes. Loan schemes essentially are set up so that instead of the umbrella company paying you through PAYE, payments are processed through ‘Tax free’ loans which are not expected to be repaid. In return a percentage of the contractors income is taken by the umbrella company as a ‘administration fee’.
- Claiming you can keep 80, 90, 95% of your wages – If the umbrella company is claiming 80 – 90% take home pay retention stay away! When using a compliant umbrella company expect to retain between 65-75% of your wages, if you are taking home much more, this is a sign of a tax avoidance scheme and could get you in serious trouble with HMRC.
With that said there are many compliant and reliable Umbrella companies in the UK, Ovations Umbrella being one of them, so please do not get put off by the bad guys. Never be tempted by non-compliant Umbrella companies as the repercussions from HMRC are not worth it. For more information or assistance on how to join Ovations Umbrella please chat with us by pressing the blue icon on the right, alternately you can call us on +447879997547 or drop an email at firstname.lastname@example.org.