The coronavirus pandemic has significantly impacted the world, and especially the UK’s temporary workforce. However, while it may be tempting to choose an umbrella that’s offering inflated pay retention, its crucial contractors, freelancers and agency workers choose a compliant umbrella company for their payroll. Keep reading, and we’ll explain 10 reasons to choose a compliant umbrella company.
1) You’ll be paying the legal amount of tax
Nobody likes the idea of losing out on disposable income – especially when the taxman grabs it. However, taxes are part of life, and we must pay the legal amount of tax and National Insurance Contributions (NIC). By choosing a compliant umbrella company, you can be sure you’re contributing the correct amounts to HMRC.
2) Compliant umbrella companies provide value for money
Compliant umbrella companies will deduct a margin each time they pay you. The umbrella company margin is the umbrella’s only source of income, and typically, it’ll be between £20 and £30 per week. When you consider the benefits you get while using an umbrella company for payroll purposes – this isn’t bad. For example, you get employee benefits, free insurance, and a host of extras.
Also, a tax avoidance scheme may help you retain more money, but the chances are they’ll be pocketing a considerable sum for themselves too. Do you want to be part of this kind of unethical arrangement?
3) You won’t be funding criminal activity
Carrying on from the point above, you might be funding criminal activity by using a non-compliant umbrella company. Tax avoidance schemes are operated by criminals who are only out to benefit themselves. They don’t care if you’re caught paying less than your fair share of tax – as long as they get away with it. In many cases, the criminals behind tax avoidance schemes are challenging to track down. In this case, the unpaid tax is reclaimed by the people who engage with the schemes instead.
4) You won’t put the supply chain in jeopardy
If you go against the recommendations from organisations in the supply chain (e.g. the agency’s Preferred Supplier List), you could be putting several parties in jeopardy. HMRC will not hesitate to investigate the entire supply chain to see if anything unscrupulous has occurred. This could cause significant disruption to your agency and other professional organisations in the supply chain. It could also unfairly damage the reputation of companies.
5) It’s ethical and you’ll be contributing towards society
By using a compliant umbrella company, you’ll be contributing what’s expected of you. To put it simply, you’ll be pulling your weight and helping the UK’s economy and broader society. Engaging with non-compliant payroll providers could have the opposite effect, and you might be funding criminal activity. If you have a conscience – this might be a significant reason to avoid unethical umbrella companies, disguised remuneration arrangements and tax avoidance schemes.
“Paying your taxes in full is the right thing to do. Not paying tax reduces our public finances. We all lose out on essential public services such as roads, the NHS and schools.”
6) HMRC tax investigations can be expensive
If HMRC were to investigate your tax affairs, they could subject you to a life-changing fine. In many cases, temporary workers have been issued with penalties in the tens of thousands. And, some of these workers didn’t even know they had engaged with a tax avoidance scheme. When it comes to reclaiming unpaid tax, HMRC is relentless and will not go easy.
7) You will have statutory employee benefits
Compliant umbrella companies will become your employer, and you’ll be an employee. As a result, you’ll benefit from employee rights – including Statutory Sick Pay and Maternity/Paternity Pay. However, if you engage with a non-compliant umbrella company, the chances are you’ll be covered by nothing of the sort. And, even if the non-compliant provider promotes the fact they provide employee benefits – what are the chances they’ll deliver – should you require them?
8) You can work with peace of mind
If you use a compliant umbrella company – you’ll have nothing to worry about. There will be no need to worry about HMRC knocking at your door or issuing you a tax bill as a result of your non-compliant activities. However, use a tax avoidance scheme or unethical umbrella company – you will almost certainly have ongoing worries about getting caught.
9) Switching between compliant umbrella’s and contractor accountants is easy
In the “new world of contracting”, it’s common for contractors to switch between a limited company and umbrella company – depending on the IR35 status of an assignment. However, it is likely to be challenging to switch between a compliant contractor accountant and a non-compliant umbrella company. Almost certainly – it’ll put a spanner in the works. Some contractor accountants may not want you as a client.
10) You could risk upsetting friends, colleagues and family members
The chances are – friends, family members or colleagues you have that use the services of umbrella companies are using compliant providers. Therefore, how would they feel if they discovered you were engaging with a tax avoidance scheme? However, your friends and family members don’t need to be using a compliant umbrella to be disappointed with your decision to avoid paying the correct amount of tax.
Top 10 umbrella companies
With over 500 umbrella companies to choose from in the UK – picking the right one can be a daunting challenge! However, we’ve collated a top 10 umbrella companies list – and it’ll make your life much easier. Every company in our top 10 is accredited by either the FCSA or Professional Passport – so you can be sure you’re using a compliant, trustworthy umbrella company. It’s also worth noting that some of our top 10 umbrella companies have special offers at the moment!