Reporting a non-compliant umbrella company

Reporting a non-compliant umbrella company

05/20/2021 - 12:32

Most umbrella companies meet all tax and labour laws and have nothing but good intentions when it comes to looking after their employees.

Unfortunately, whether it’s through inability or corruption, some umbrellas don’t meet the standards that employees expect of them.

If you suspect that an umbrella company is acting illegally or unethically, you should report them. We explain why and how you can do this below.

What is a non-compliant umbrella company?

An umbrella company is a payroll provider that works with contractors to help them get paid. They will charge clients on your behalf, while also deducting tax and National Insurance.

Non-compliant umbrellas still help contractors get paid, but they don’t meet all the necessary tax and labour rules.

Some umbrella companies may be tax avoidance schemes operating in disguise. These schemes typically advertise very high rates of take-home pay for their contractors, but usually they are acting illegally.

Other umbrella companies may treat their workers unlawfully. For example, some companies may retain worker’s accrued holiday pay or withhold other employment rights that employees are legally entitled to.

Why should I report a non-compliant umbrella company?

Reporting a non-compliant umbrella company is in your best interest as an employee.

If your umbrella company is avoiding tax, HMRC will come after you for unpaid liabilities. One example of this was during the loan charge scandal.

Many contractors were working with what they thought were fully compliant umbrella companies. In fact, these arrangements were not legal and scheme participants were forced to return many years worth of unpaid tax or face a large fine.

It’s also in your interests to report an umbrella company if you know they are breaking labour laws. As well as withholding holiday pay from you, a non-compliant umbrella is probably also doing this to many other employees, including some that don’t know their rights.

How can I report a non-compliant umbrella company?

There are two main ways to report a non-compliant umbrella company. Reporting to a professional body or reporting to HMRC.

Reporting an umbrella to a professional body

Umbrella companies are regulated by several well-respected professional bodies such as the FCSA, APSCo and Professional Passport. If an umbrella company is not a member of at least one of these bodies, you should not use them in the first place.

If an umbrella company is accredited by one of these bodies and you believe that they are operating illegally or unethically, then you should report it to the relevant body.

Reporting fraud to HMRC

If you suspect that an umbrella company is conducting tax fraud, then you should contact HMRC. This could include running a tax avoidance scheme, a non-compliant umbrella company or a so-called ‘mini-umbrella’.

HMRC has a dedicated phone number for fraud. Call: 0800 788 887 or report fraud online.

If you are concerned that you are using a non-compliant umbrella, you can always switch to a legal alternative like To learn more, speak to a member of the team. Call: 0800 121 6513.