Umbrella companies are experiencing demand like never before – due to recent changes in IR35 legislation (especially off-payroll in the private sector). However, with hundreds of thousands of workers requiring the services of umbrella companies to manage their payroll, does the government endorse umbrella companies? Keep reading, and we’ll answer this much-debated question.
Working through an umbrella company
To help contractors, freelancers, and temporary workers with umbrella companies, the government recently released some online guidance called Working through an umbrella company. The guidance includes a lot of helpful information about umbrella companies, including how they work, deductions, Key Information Documents (KID), umbrella company payslips, tax avoidance schemes, and reporting non-compliant umbrella companies.
The guidance has been written to help those new to the concept of umbrella companies. It suggests that the government is fully aware and happy with umbrella companies – providing they’re compliant and abide by UK tax law. However, while the government indeed acknowledges umbrella companies, they do not endorse them. The government does not make any recommendations as to which umbrella you decide to use (assuming they’re not a tax avoidance scheme or disguised remuneration arrangement).
One of the main reasons umbrella companies have not been banned or outlawed by the government is that they process payroll according to PAYE – HMRC’s tax system. Umbrella companies help ensure temporary workers pay the correct amount of tax and National Insurance and stop workers from engaging with non-compliant and unethical payroll arrangements.
Calls for the government to regulate umbrella company sector
A few months ago, an umbrella company came under the spotlight as it was accused of retaining accrued holiday pay from its employees. This scandal has put a cloud over the entire industry, and many stakeholders have rallied for the government to regulate umbrella companies. It’s also no secret that tax avoidance schemes and non-compliant arrangements still exist and prey on vulnerable workers. However, it’s a shame the actions of a small minority of umbrella companies have tainted the industry’s entire reputation.
The FCSA and Professional Passport
Does the government endorse umbrella companies? No. However, two professional bodies are regulating the umbrella company sector – the Freelancer and Contractor Services Association (FCSA) and Professional Passport. Both bodies are well respected and offer prestigious accreditation to umbrella companies that are committed to compliance.
The umbrellacompanies.org.uk team is very fond of both the FCSA and Professional Passport, and we believe the accreditations on offer mean a great deal. As a result, we do our best only to feature FCSA and Professional Passport accredited umbrella companies on our website. If you’re interested in choosing an umbrella company committed to compliance, we recommend you only consider FCSA and Professional Passport accredited organisations.
Top 10 umbrella companies
Our team has put together a list of top 10 umbrella companies, and it’s well worth checking out! Not only are the top 10 accredited by either the FCSA (Freelancer and Contractor Services Association) or Professional Passport. And, some of the top 10 umbrellas have special offers at the moment!