Spotting signs of umbrella company fraud

Umbrella companies are used by recruitment agencies to pay temporary workers, but many operate fraudulently or are not tax compliant. To address this, HMRC’s Spotlight 71 highlights warning signs of umbrella company tax avoidance, urging workers to check their employment contracts, pay slips, and salary payments carefully.

Employment contract red flags include: sudden transfers to a new company, signing contracts with one firm but being paid by another (especially overseas), or being asked to sign multiple or unusual agreements such as annuity contracts.

Pay slip warnings include: changes in the PAYE reference, unexpected drops in pay, mismatched net pay and bank payments, missing tax or NI deductions, or restricted access to pay portals.

Workers should ensure salary matches the pay slip and is received as one taxed payment.

If fraud is suspected, move to a compliant umbrella company and report concerns anonymously to HMRC.