Many Umbrella companies are straying into the area of tax avoidance. You can spot them as they promise returns of 90% and more and somewhere on the website (if you look hard enough) you find mention of a leading Tax Counsel or Tax QC. These are not the traditional employee Umbrella scheme that you think they are, if they mention Tax Counsel, or Counsel’s opinion, they’re an Avoidance Scheme, so BEWARE!
Why should you care? Well because HMRC are out to get you! Avoidance is becoming a big issue for Government and they’re ploughing lots of resources into stopping it. One such recent measure is to make users of avoidance schemes pay the disputed tax up front, so you could end up paying over the supposed tax saving AND paying the scheme providers a fee!!!!
HMRC have published a document called “The Top 10 things a Tax Avoidance Promoter won’t always tell you”, which makes very interesting reading, so take a few minutes to check it out and make sure you don’t become a victim.
So, as a Contractor it looks as if it’s best to ‘avoid’ Umbrella Company tax avoidance schemes completely. To find out more about the difference between Contracting through an Umbrella or a Limited company and how you can legally keep more of your Contracting income, read our guide here.