How to avoid a disguised remuneration scheme

As a contractor who is working with an umbrella company, there are many scams that you should be aware of. 

One of these scams is known as a ‘disguised remuneration scheme’ which this blog will discuss in more detail. Carry on reading to find out what is meant by a disguised remuneration scheme and more importantly, how to avoid them!

What is a disguised remuneration scheme? 

Disguised remuneration tax avoidance arrangements aim to circumvent the requirement of paying Income Tax and National Insurance contributions. Typically, these schemes involve receiving a loan or alternative payment from a third party that is usually never repaid. 

Although individual margins might differ, every umbrella company should apply the same tax and employment law rules. 

Therefore, what you’re offered should generally be similar to each umbrella provider. 

What you need to know 

• An umbrella company which is offering you a higher take-home pay than you expected, is more than likely operating a disguised remuneration scheme. 
• Each payment made through PAYE is reported directly to HMRC via Real Time Information (RTI). HMRC can cross-reference every worker that has been engaged by the provider operating disguised remuneration and contact them to repay any lost taxes and National Insurance Contributions. 
• Overall, it’s simply a case of when you’ll get caught, not if!

How to avoid a disguised remuneration scheme 

1. Sign up for a Personal Tax Account with HMRC

Use this to check whether the earnings on your payslip are the same as those being reported to HMRC. 

2. Always make sure you receive a payslip 

If an umbrella provider tells you that a text message is your payslip, they could be concealing the income being reported. 

3. Check your payslip

Ensure you check your hours/days worked, and rate is all correct. If you’re receiving a lower amount than you should or there is a loan, advance deduction etc., it may be a sign of a disguised remuneration scheme. 

We hope you found this article of use – be sure to share it around so your fellow contractors don’t get caught out! 

Remember that Mint is accredited by Professional Passport! This means that we comply with the standards, regulations & legislations that are legally required for an umbrella provider.