HMRC Approved Umbrella Companies and Tax Avoidance Schemes

Have you heard about “HMRC Approved Umbrella Companies”? Are you familiar with the tax avoidance schemes run by umbrella companies posing as HMRC-approved?

If the answer is no, then keep reading. In this article, we will discuss the facts and myths surrounding HMRC-approved umbrella companies and how fraudsters exploit this concept to their advantage. We will attempt to decode these in detail.

As a contractor specialist portal, we receive enquiries from contractors looking for an umbrella company almost daily. When contacted, contractors often ask us to refer them to an HMRC-approved umbrella company. Initially, this used to surprise us, but not anymore.

What does ‘HMRC-approved umbrella company’ mean?

Taken literally, this suggests that HMRC has conducted a due diligence check on the operations of the umbrella company, verifying and approving it, thereby making it safe for contractors to use. In reality, HMRC does not check, verify, or approve any umbrella company in the UK.

There are more than 500 umbrella companies are operating in the UK, and they are not regulated by the government. This means that the onus of running compliance checks and doing a thorough due diligence is on the umbrella company falls on the person appointing them.

It is very difficult to differentiate between a compliant and a non-compliant umbrella company. From the outside, they may look the same. Sometimes, a non-compliant company may appear more legitimate than a compliant one. They often advertise themselves as HMRC-compliant umbrella companies, using terms like “HMRC-approved” to lure contractors into their trap.

Non-compliant umbrella companies will present their tax schemes as HMRC-approved, claiming that by using these schemes, you can achieve a higher take-home pay. They may offer “standard” and “enhanced” pay arrangements, labelling them as tax-efficient schemes.

These companies use disguised remuneration schemes, where they pay you in part or in full through loans, salary advances, grants, or annuities. They will claim that these are non-taxable benefits, which you can legally use to increase your take-home pay. However, this is untrue—it is simply a method to avoid tax.

Using such schemes could result in you having to pay additional tax, National Insurance Contributions (NIC), penalties, and interest. If you have the slightest doubt, always seek professional advice.

List of HMRC approved umbrella companies

There is no list of HMRC-approved umbrella companies. As mentioned above, HMRC does not check, verify, or approve umbrella companies in the UK.

Some umbrella comparison websites work with non-compliant umbrella companies. In some cases, these sites are co-owned and operated by fraudulent umbrella companies. Be cautious before using such sites. Always look for reliable sources, check online reviews, and discuss with friends and colleagues before engaging with any umbrella company.

HMRC regularly publishes and maintains a list of umbrella companies that are found to be involved in running tax avoidance schemes.

Below is HMRC’s list of umbrella companies linked to tax avoidance schemes. It includes the schemes’ names, promoters, enablers, and suppliers. The most recent additions to this list were published on 5 September 2024 with new additions being Everest Contracting Limited, Innovate Limited (Registered in the Isle of Man), Odyssey Payroll Limited, and Optima Limited (Registered in the Isle of Man).

Source: HMRC official website

If there’s any discrepancy in our list or for any changes/feedback, please write to us at [email protected] and our team will review it.

You can report tax fraud and avoidance by a person or business to HMRC online or call the HMRC fraud hotline.

Contact the HMRC fraud hotline if you cannot use the online service.

    Telephone: 0800 788 887
    Outside UK: +44 203 080 0871
    Monday to Friday, 9am to 5pm (except bank holidays)
    Find out about call charges

If you need any help with finding a compliant Umbrella Company, please email us at [email protected], and we will get in touch with you. Alternatively, you can visit our top umbrella companies page for a recommendation.