Legislation
Temporary workers and engaging with umbrella companies
Date
Ongoing requirement
Summary
Many businesses use recruitment agencies to source temporary workers. These agencies may choose to outsource the administrative burdens of operating HR and payroll for their workers to an umbrella company. Therefore, many temporary workers of a business may be employed by umbrella companies.
If you’re an agency or a business using temporary labour, you need to be aware of the potential dangers of umbrella companies that operate tax avoidance schemes.
Some umbrella companies are non-compliant and operate disguised remuneration schemes. These schemes claim to prevent certain payments made to workers from being taxable. They aim to do this by describing taxable earnings paid to a worker for doing their job as something that is non-taxable instead.
If you engage with an umbrella company operating an avoidance scheme, you become part of the supply chain of the scheme and risk reputational damage and loss of business.
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