Should I use an offshore umbrella company to maximise my pay?

No.

Contractors and freelancers in the UK should never engage with an offshore intermediary (offshore umbrella company) to maximise pay. Doing so has plenty of risks, including the risk of an HMRC investigation and life-changing fine.

When using a compliant UK-based umbrella company, you become an employee of the umbrella. As a result, you will be paid in accordance with HMRC’s tax system – Pay As You Earn (PAYE). PAYE deductions include income tax, Employee’s National Insurance Contributions (NIC), student loan repayments and pension contributions. Umbrella employees will also be subject to employment costs – Employer’s National Insurance Contributions and the Apprenticeship Levy. These are deducted from the assignment rate which is inflated to ensure that you, the contractor, is not out of pocket. If you have any questions about the employment costs, please speak with your recruitment agency.

Offshore umbrella companies usually have one thing in common – they promote inflated take-home pay. However, to achieve this, they take advantage of tax loopholes or deliberately break these rules.

Non-compliant offshore umbrella companies often process payroll in unusual ways, including:

• Paying employees with a combination of minimum wage and loans.
• Paying employees with a combination of minimum wage and shares.
• Paying employees with a combination of minimum wage and credits.

Most, but not all offshore umbrella companies will advertise themselves by:

• Pretending they’re compliant.
• Suggesting they’re approved by the UK government (HMRC does not promote or approve any umbrella companies, but they do acknowledge how compliant umbrella companies operate).
• Implying they work with global corporations.
• Writing unethical and persuasive messages such as “you deserve more of your money”.

For more information, please read our short guide about how to spot a tax avoidance scheme.

Whatever happens, do not engage with an offshore umbrella company. As a worker in the UK, you are required to pay the correct taxes and NIC. By using a non-compliant umbrella company, you put yourself at great risk of an HMRC investigation and severe financial penalty.

The best way to ensure you do this is to use a compliant umbrella company with professional accreditation from the FCSA. You may also be interested in using a SafeRec Certified Umbrella Company because you can access an AI-powered payslip audit every time your umbrella company pays you. This audit will identify any malicious or unusual deductions – allowing you to be paid with complete peace of mind.

Churchill Knight Umbrella

Churchill Knight Umbrella is accredited by the FCSA and is a SafeRec Certified Umbrella Company. If you are looking for a new umbrella company you can trust, please complete the short form on this page or call our friendly sales professionals at 01707 871622 to request a free, tailored take-home pay calculation.