Workers in the UK have been issued an urgent tax warning. In a recent message, HM Revenue and Customs (HMRC) said “don’t get caught out”.
In a post made to social media platform X, HMRC said: “If you’re paid through an umbrella company, look twice and stay alert to the signs of tax avoidance. “Don’t get caught out.” Working for an umbrella company means becoming a temporary employee of a third-party firm that manages payroll, taxes, and HR administration for contractors.
They are often used by recruitment agencies to pay temporary workers. On GOV.UK it explains: “If you’re a contractor, you may be employed through an ‘umbrella company’. If you’re not sure, it’s best to check as some umbrella companies try to break the tax rules. You may be at risk. But if you understand how umbrella companies work, you can take steps to avoid these risks.”
How to check
One of the first things to do is checking your pay. “Understanding how you’re being paid is the best way to make sure you aren’t using an umbrella company that is operating a tax avoidance scheme,” GOV.UK said.
“Checking your payslips and contractual arrangements will help you confirm you are paying the right amount of Income Tax and National Insurance.” Things to look out for include:
- Receiving more money in your bank account than what is shown on your payslip
- Receiving untaxed payments like loans or capital advances
You can use the Government’s online umbrella company tool here to calculate what your pay should be. You can also check the Government’s list of known tax avoidance schemes online here.
What to do if you think you’re involved
If you think you might be involved in a tax avoidance scheme you should get in touch with HMRC as quickly as possible. GOV.UK said: “We’ll support you. We can help you get out of the scheme and settle your tax affairs.
“Ignoring the problem is not the answer. The longer you leave it the bigger the tax bill.
“Our aim is to get you back on the right track. No judgement. Simply offer you the support you need. And if you can’t afford to pay everything in one go, we may be able to offer you an instalment arrangement.”
You can report a tax avoidance scheme online here – this can be anonymous if you choose. You can also phone HMRC on 0800 788 887 – if you’re outside the UK you can call +44 (0)203 0800 871.