Question submission date: April 2021
Full Question: “I’ve heard that Mini Umbrella Companies can offer a higher take home pay, how does that work?”
At first sight they might seem like a tempting option, but Mini Umbrella Companies (MUC’s) offer lucrative offerings by reducing PAYE, national insurance and VAT paid to HMRC. If an agency is using an MUC it is putting your business at risk through its non-compliance.
In brief an MUC will use the VAT flat rate scheme and employment allowance scheme fraudulently and can leave contractors with unpaid tax bills that can be investigated by HMRC.
Common signs that a company is an MUC to look out for include:
- An unusual company name or business address that doesn’t seem appropriate or in-line with the type of business activity they are offering.
- Little compatibility between the services they are offering and their description as it appears on Companies House.
- Company directors that usually have no previous experience in the UK labour supply industry.
- An unusually high movement of workers.
- A business lifespan of less than 18 months.
Whilst already on the radar with HMRC, it’s advisable to make sure you do your due diligence and if working through an Umbrella Company just be aware of the above so you know when to recognise an MUC.