Spot the signs of disguised remuneration tax avoidance schemes
Updated 14 August 2025
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Tax avoidance does not pay: most schemes do not work. People who use tax avoidance schemes may end up paying more than the tax they tried to avoid as well as interest and potentially a penalty. This is on top of the fees they paid to the person or business offering them the scheme.
Disguised remuneration (DR) avoidance schemes are tax avoidance arrangements that seek to avoid Income Tax and National Insurance contributions (NICs), by paying people who use the schemes their income in the form of loans or other payments, which are unlikely to ever be repaid. These payments are no different to normal income and are taxable.
Everyone is legally responsible for their tax affairs and for paying the correct amount of tax, even if they get someone else to do it for them. If you are worried about being caught up in a scheme, follow our quick guide below to help you spot a DR tax avoidance scheme.
The warning signs
We have listed the main signs to watch out for.
1. Has the umbrella company been accredited or approved by HMRC?
Check on the company website to see if they state they have been accredited by a body who audit payroll companies and use a strict code of conduct to ensure their members operate ethically and legally.
The scheme may say that it’s HMRC approved. This should raise concerns. HMRC never approves avoidance schemes or the compliance of any umbrella companies, so it’s best to conduct your own research before signing up to an umbrella company. Check the company’s history and verify its legal registration through Companies House. Also, read reviews and feedback from other contractors to gauge its reputation.
2. HMRC has named the company
Check our list of tax avoidance schemes that we’ve named including some of the people involved in marketing them. The list is regularly updated as new schemes are identified.
This is not a complete list of all tax avoidance schemes currently being marketed. If a tax avoidance scheme or promoter is not shown in the list, this does not mean that they are in any way approved by HMRC.
3. The umbrella company is based outside the UK
Check any addresses used on contracts and other correspondence to help identify if an umbrella company is based overseas.
Search Companies House for details of companies, the directors and those involved in paying you. They may be based overseas if they do not appear in the search results or, even if they do appear, the directors may not be resident in the UK. Even where an umbrella company has a UK phone number, they may still be based outside the UK. Companies House provides a range of information such as company details and a register of disqualified directors.
Remember that for tax purposes, outside the UK includes places such as the Isle of Man and the Channel Islands.
Check the umbrella company details and returns filed with Companies House to make sure details such as its financial position, location and trading history are consistent with what you have been told.
4. The company is advertising high take home pay rates
If the amount you receive is more than the ‘net pay after tax’ on your payslip, this cannot be correct. It means you are not paying the full amount of Income Tax and NICs on your income.
If you work through an agency, they should provide you with a key information document (KID). This will tell you about your pay and employment. It will show you the deductions and fees in relation to assignment and contract rates, and how they affect your gross and net pay.
5. You were asked to sign a contract and an agreement
Your umbrella company may ask you to sign a different agreement such as an annuity in addition to your employment contract. This is not standard practice.
You may be offered a choice between ‘standard’ or ‘enhanced’ arrangements. They may be described as good tax planning to minimise tax liabilities. The enhanced option may mean the umbrella company will deduct a higher margin or fee from the amount of money they are paid by the recruitment agency or end client, before passing the money on to you.
Your contract may not state how your income will be paid or provide a breakdown of all the deductions to be taken from your income. Or you could be asked to sign a short contract that does not provide the full terms and conditions. This may happen with digital contracts where the terms and conditions are held in separate documents that cannot be easily accessed, printed or saved. These are all signs of withholding the full terms of the contract from you.
6. Some or all of your salary payments are not taxed
Some umbrella company payslips will not show all the payments made to you by the umbrella company, especially where they involve more than one type of payment, paid separately into your bank account.
Your payslip may only show payments paid through PAYE, whereas other payments could be described as loans, annuities, bonuses, shares, fiduciary receipts, credit facility, capital payments/advances or something similar. These payments are no different to normal income and should be subject to Income Tax and NICs deductions.
7. The company is charging a higher fee or margin
An umbrella company may charge a fixed weekly or monthly amount — for example, £25 to £30 a week. They should have told you about these fees when you signed your contract.
You should compare these fee rates with other companies, to make sure you are not paying higher than the normal fees.
In some cases, fees can be at a rate similar to the tax or NICs you would expect to pay, giving the appearance the correct amount of deductions have been made from your pay. It’s best to check each deduction to ensure you’ve paid the right amount of tax and NICs.
If it looks too good to be true, it almost certainly is
If you have been offered a tax avoidance scheme or think you’re involved in one and want to leave it, email HMRC at CAGetHelpOutOfTaxAvoidance@hmrc.gov.uk. We know that people can sometimes make mistakes, so we’re here to help. We offer a range of support to get you back on track or avoid being caught out in the first place.
Get more information or report a scheme and an umbrella company
Report a scheme, or the person or the business offering you the scheme.
You can do this anonymously if you prefer. Use the Report Tax Fraud Online form and make sure you enter the code ‘TAC’ in the ‘Other information’ section.
You can also phone HMRC on 0800 788 887 - if you’re outside the UK, phone +44 (0)203 080 0871.
This guide has been published to support HMRC’s Don’t get caught out campaign.