This single regulator will expand its remit to include the regulation of umbrella companies, a move welcomed by Parasol as a member of the FCSA board.
While the single regulatory body recommendation is in consultation and has no definite implementation date, we look to the importance of umbrella solutions being transparent and compliant in their conduct – especially in a currently unregulated industry.
What is a compliant umbrella solution?
While there is no such thing as an “HMRC approved umbrella company”, there are moves to regulate the industry and our recommendation is to seek an umbrella solution that is FCSA approved. This accreditation ensures the company will fall within the remit of the Single Enforcement Body, once active, and be held to a rigorous set of standards and regulations.
The easiest way to determine if an umbrella company is compliant is to see that they offer a detailed payslip. Compliant companies will provide you with the details of all deductions, as well as their margin. This ties in with recommendations from the Taylor review and the resultant Good Work Plan, referencing pay transparency.
Some buzzwords to look out for and avoid include “loan credit agreements”, “offshore” or “payment to take advantage of Capital Gains Allowances”. These are all unlikely to be compliant with HMRC rules and regulations.
Is your umbrella solution on-point with legislation?
A major aspect of the day to day workings of an umbrella company revolve around legislation, so it’s vital the company is familiar with all regulations and stays abreast with reforms. Not only will the company need to be familiar with the legislation, but they should also fully and transparently apply changes to continue their (and your) upkeep of compliance.
An aspect of the Good Work Plan which focuses on transparency is the introduction of the Key Information Document. This document will reflect umbrella companies’ retained margins and all benefits, giving you full visibility and helping to make your decision easier when choosing an umbrella solution.
Further, the assignments you take on must be licit and the umbrella solution should only ever support the claim of legitimate expenses (which, in the case of employees is Client Billable Expenses and business costs and mileage – subject to SDC). Any company that supports or encourages you to claim for ineligible expenses puts you at risk for investigation by HMRC.
HMRC approved compliant umbrella companies
Any umbrella that offers you a “higher take home pay” or “reduced tax liabilities” should raise a red flag.
Your income can and should be attracting PAYE tax and National Insurance, and any umbrella that offers a way around this could leave you vulnerable to penalties from HMRC down the line – as well as holding you liable for repayment.
Parasol is a proudly compliant umbrella solution, and with our promise to be with you all the way, we’re proud to showcase our resource centre for all things umbrella compliance. Got a question? Get in touch by requesting a callback.