Post-April will be an onslaught of Umbrella companies trying to convince you why they’re the best option for your Inside IR35 engagements. Some of them will for the most part have your best interests in mind, but others won’t.
You’ll be flashed shiny headlines of 80-90% take-home that’s ‘HMRC compliant’ (this isn’t a thing, no matter what they tell you) and as with the public sector, some will fall for it. But you won’t. Because you’ll know to look out for the right things, like:
- Contract of Employment: As part of joining an umbrella company, you become an employee and therefore should receive a contract of employment and the same statutory rights afforded to all UK workers as standard. You should be given one as part of your contract with the umbrella company.
- PAYE: As an employee of the Umbrella company, they should only be offering you payment via PAYE and should be making it clear in the payslips you receive what deductions they have made on your behalf. Anyone offering you any form of loan or annuity scheme is breaking the law, and by working with them so are you.
- Hidden costs: Check how they will take payment for you, is it per timesheet or as a % of your earnings? If it’s the latter then in all likelihood it’s going to end up costing you more money. An average figure is anywhere between £10-£40 per working week. It’s also worth considering if there will be an exit fee for leaving the umbrella, in a lot of cases there won’t be, but it does no harm to check.
- Verify everything: Checky that the tax being taken out on your payslips matches up with your Personal Tax Account, the HMRC’s online resource for checking your tax payments. If the payments on your account don’t match up with the payslip you’re being given, then you need to find out why that’s the case, immediately.
- Take home pay: Other than their fees every umbrella company should be offering you the same take home pay. Anyone offering you more than that is leaving you exposed to the HMRC. A quick search on Google for ‘Umbrella Companies’ will bring up plenty offering 80-90% take home, steer clear.
- FSCA Member: An Umbrella company being a member of the FSCA is a good indication of their good intentions. To become a member, they have to submit to a full audit by the FSCA’s tax professionals.
Be careful of agency recommendations: Again, most agencies will have your best interests at heart, but there might be some Umbrella companies that have fallen through the cracks, or maybe they’ve pulled the wool over the agents’ eyes. Whilst their recommendations might hold some weight, always do your own due diligence.
Not many fun facts in the article but I feel as though it’s definitely a topic that needs covering to ensure that if your engagements are inside IR35 and you’re considering using an umbrella, that you’re on the road to doing it correctly.
Go Back
