Contractors who work through umbrella companies instead of their own Limited Companies may be relatively safe from unwelcome entanglements with IR35 legislation – but this doesn’t necessarily mean that they’re completely out of the HMRC frying pan. With deficit reduction being the superordinate priority of the UK’s coalition government, HMRC is making it plain that it intends to collect every penny of tax from the citizenry that it can find.

Anyone who has held two or more jobs during the course of a single tax year could well attract the scrutiny of the tax man, which means that agency temps and employees of umbrella companies may find themselves the focus of revenue raising attention. It’s in the nature of contractor work to move from project to project and HMRC’s decision to use this particular criterion as an “alert” signal is leading to some anxiety amongst the flexible workforce.

Things shouldn’t be too bad if your umbrella company has maintained your paperwork properly – you should, if required to do so, be able to demonstrate fairly easily that you’ve paid all due taxation through your PAYE umbrella as well as all necessary national insurance contributions. Whilst this may not spare you an unwelcome phone call or letter inviting you to attend an HMRC interview, you probably only need to worry if your company has been a little on the slapdash side in its financial record-keeping. This is a little more likely to be the case where record-keeping systems are manual rather than automated.

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