How to Make Sure an Umbrella Company is Trustworthy

How to Make Sure an Umbrella Company is Trustworthy

As the Managing Director of a recruitment company, or as someone responsible for making important decisions, your reputation is front of mind every time you make a choice about which companies you partner with. This is especially true when it comes to umbrella companies, some of which have less-than-scrupulous reputations. So how can you make sure that the umbrella company you choose is trustworthy? Here we look at what to watch out for and give you pointers to enable you to make an informed decision.


Bad Press

There have been numerous examples of non-compliant umbrellas operating in the UK in recent years, many of which have been highlighted in the press – examples of their behaviour include:

  • Claiming that contractors can keep up to 95% of their salary and still be tax-compliant
  • Paying a fraction of their salary through payroll, and the rest through loans or ‘other’ payments
  • ‘Additional’ payments not listed on their payslip
  • Payments which do not originate with the umbrella company itself and which come from other companies, particularly offshore ones
  • Non taxable arrangements such as salary advances, loans, profit shares, grants, credit facilities or capital payments.

It’s not unusual for non-compliant umbrellas to use misleading terminology too. Phrases such as ‘HMRC-approved’ or ‘Better than PAYE’ are a clear indication that these organisations are disguised remuneration schemes (tax dodges) pretending to be legitimate umbrellas. 

For absolute clarity, HMRC does not approve any umbrella scheme, and any company claiming such an accolade is trying to mislead and eventually defraud both your contractors and the honest and decent tax payers of this country by not paying their way. 



Using a non-compliant umbrella company can have serious consequences, not only for your contractors but also for your business. Eventually they will be brought to book and your recruitment agency will be known as an ‘enabler’ of tax avoidance, damaging your reputation. Your details may also be published by HMRC.

You may also face checks on your own tax compliance, financial penalties and may be asked to repay all the tax liabilities, including extra National Insurance contributions, tax and accrued interest, that have been avoided.


Accreditation and Compliance

Luckily for MDs and back office teams there is one very simple method by which you can avoid partnering with non compliant umbrellas. 

Many reputable and hard-working umbrella companies are now accredited with the bodies such as the FCSA which advocates for compliance, transparency and reliability within the umbrella market in order to drive up standards. Furthermore, legitimate umbrella companies will have a strict code of conduct and will make their commitment to compliance and security easily accessible.

i4 already partners with over 11,000 agencies, employs almost 40,000 contractors and, over the last 18 years has processed in excess of 730,000 payments compliantly, quickly and efficiently. Registration for your contractors is simple, and because we’re recruiter- as well as contractor-focused, we’ll keep you up-to-date with all the referrals you make, helping you concentrate on your core activities, and making sure that you remain on the right side of the taxman.

For more information about what i4 can do for your recruitment agency you can call us on 0800 084 3058 or 033 0120 0130 30, email us at or fill in the contact form here, and one of our helpful team will be in touch.