"The use of umbrella companies to legally employ freelance contract labour from a PAYE and NIC withholding perspective has become increasingly popular over the past 4+ years for both staffing agencies and their end clients."
"However, while the umbrella company approach can provide end clients and agencies with many advantages, the reality is that there are a number of umbrella companies out there which are acting illegally, creating real fraud risks for businesses, agencies and contractors."
"These shady umbrella companies do not transfer PAYE and NIC to HMRC, instead they pocket it for themselves. Although the PAYE and NIC risk with these arrangements typically sits with the umbrella company rather than the staffing agency or end client, there is still a risk of public image damage for businesses and agencies."
"If a fraud investigation becomes public and reaches the press, then this can damage the agency or businesses reputation, leading to a loss of profits. More so if this is one of the cases where the PAYE and NIC risk does sit with the agency or end client, as in that scenario they will have to pay for the financial and legal cost of the fraud."
Collection
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