ESM2445 - Chapter 11 ITEPA 2003- purported umbrella companies - examples
This guidance is effective from 6 April 2026 and relates to draft legislation expected to be included in the next Finance Bill. The legislation and guidance is subject to revision before or during the process of Parliament considering the Bill.
Section 61Z1 Chapter 11, Part 2 ITEPA 2003
This page provides some basic examples of when the purported umbrella company rules apply. For further information about purported umbrella companies see ESM2440 - purported umbrella companies.
Example – Case 1
ABC Bank approaches 123 Personnel, an agency, to supply them with a worker to support some IT infrastructure changes. ABC Bank and 123 Personnel agree that the worker will be supplied via an umbrella company. 123 Personnel sources a worker and arranges for them to be engaged via ZXC Umbrella. 123 Personnel wants ZXC Umbrella to employ the worker and, as part of due diligence checks, requests supporting evidence of this. ZXC Umbrella provides a specimen contract of employment and some payslips showing PAYE deductions. However, this evidence is fabricated and ZXC Umbrella does not actually employ the worker, making gross payments to them.
It is reasonable to suppose that one or more of the participants in the arrangements (other than ZXC Umbrella and the worker), namely ABC Bank and 123 Personnel, would assume that the worker was employed by ZXC Umbrella. It also appears to be the case here that ZXC Umbrella has taken at least one step that it is reasonable to suppose was intended to give the impression that it is the worker’s employer. Assuming the remaining conditions for Case 1 to apply are met, ZXC is a purported umbrella company and the purported umbrella company rules will apply to it. 123 Personnel will be a relevant party and will be jointly and severally liable.
Example – Case 2
QWE Catering needs temporary staff to support the running of an event. It has a bank of workers that it has used previously and one agrees to take the role. QWE Catering agrees with the worker that they will be engaged via an umbrella company – ZXC Umbrella. ZXC Umbrella engages the worker on a contract for services, meaning that it is not an umbrella company for the purposes of Chapter 11. ZXC Umbrella enters into a contract with QWE Catering to supply the worker to it. The conditions are met for the agency legislation to apply to treat ZXC Umbrella as the worker’s employer (see ESM2000 - Agency and Temporary workers).
In this scenario, no party in the chain has provided work-finding services to the worker that result in the worker providing services to QWE Catering. Assuming the remaining conditions for Case 2 to apply are met, ZXC Umbrella is a purported umbrella company and the purported umbrella company rules will apply rather than the agency legislation. The worker will be treated as ZXC Umbrella’s employee and QWE Catering will be a jointly and severally liable relevant party.
Example – Case 3
ABC Bank approaches 123 Personnel, an agency, to supply a worker to support some IT infrastructure changes. ABC and 123 Personnel agree that the worker can be engaged via their own personal service company. 123 Personnel sources a worker who operates through PSC Ltd, a company in which the worker holds a material interest and if PSC Ltd were an umbrella company, the umbrella company conditions would be met. The worker provides 123 Personnel with a contract showing PSC Ltd as the employer and payslips which give the impression to 123 Personnel and ABC Bank that PSC Ltd is employing the worker and that a significant proportion of the sums payable will be paid as taxable earnings.
However, in practice PSC Ltd does not pay a substantial proportion of the sums it receives to the worker as earnings.
Here it is reasonable to suppose that one or more participants in the arrangements (other than PSC Ltd and the worker), namely ABC Bank and 123 Personnel, would assume that a substantial proportion of amounts provided to PSC Ltd in respect of the services will be paid to the worker as earnings. Assuming the remaining conditions for Case 3 to apply are met, PSC Ltd is a purported umbrella company and the purported umbrella company rules will apply to it. 123 Personnel will be a jointly and severally liable relevant party.