Working through an umbrella company

HMRC has published new guidance Working through an umbrella company on payment arrangements for agency workers working through an umbrella company. The guidance notes that the umbrella company will pay the workers and deduct PAYE income tax and NICs, and that the employment agency which provides the workers to the client will pay the umbrella company (having deducted its fee). The guidance notes that if any amount paid to workers under their contracts of employment with the umbrella company is described as ‘non-taxable’, the company could be involved in tax avoidance.

HMRC has also updated related guidance April 2021 changes to off-payroll working for intermediaries and contractors to clarify that the off-payroll working rules are unlikely to apply to an agency worker or contractor who is employed by an umbrella company.