HMRC Umbrella Company Warning: Named Schemes, What It Means and What to Do

What HMRC's umbrella warning list is

HMRC maintains a live register of tax avoidance schemes, promoters, enablers and suppliers that it publishes at gov.uk/government/publications/named-tax-avoidance-schemes-promoters-enablers-and-suppliers. The list is updated when HMRC opens formal investigations and when cases are resolved. It names specific companies and schemes by their legal or trading name, and is distinct from the broader HMRC Spotlight publications, which describe categories of arrangement rather than naming individual entities.

The list sits alongside HMRC's wider anti-avoidance toolkit. The power to publish names comes from Finance Act 2021 and Finance Act 2022 provisions that allow HMRC to name schemes, promoters, enablers and suppliers it is investigating. That publication power complements, rather than derives from, the older Promoters of Tax Avoidance Schemes (POTAS) regime and the Disclosure of Tax Avoidance Schemes (DOTAS) rules, under which HMRC can issue conduct and monitoring notices and require promoters to disclose scheme details.

For contractors, the practical significance is straightforward: if a name on that list matches your umbrella, your payroll company, or any entity that paid you during a contract period, you are in a position where HMRC already has information about the arrangement and is actively working to recover the tax it believes was avoided.

Always check the live gov.uk page directly. Third-party republications of the list may be out of date. HMRC updates the list without announcement, and entries are sometimes removed when a promoter ceases trading or a case is concluded. The current date of the list appears on the gov.uk page.

Why HMRC focuses on umbrella avoidance

The umbrella sector became a target for avoidance scheme promoters largely because of the structural position umbrellas occupy in the supply chain. The umbrella receives a gross assignment rate from the agency, is the legal employer, and operates payroll. That gives the umbrella control over how the assignment rate is characterised before it reaches the worker. In a compliant umbrella, the entire rate (minus legitimate employer costs) flows through PAYE as salary. In a non-compliant arrangement, a portion is diverted into a secondary payment stream, labelled as something that is not employment income, to reduce the PAYE and NIC charge on that portion.

HMRC has estimated the annual loss from non-compliant umbrella arrangements in the hundreds of millions of pounds. The Freelance and Contractor sector is disproportionately affected because contractors often move between engagements and umbrellas quickly, making due diligence feel burdensome, and because some agencies historically directed workers toward specific umbrellas without adequate oversight.

The Finance Act 2026 joint and several liability (JSL) reform (inserting a new chapter into Part 2 of ITEPA 2003) was Parliament's response: from 6 April 2026, the recruitment agency in the supply chain becomes jointly and severally liable for the PAYE an umbrella fails to remit, with NIC addressed through corresponding regulations. That single change has fundamentally altered agency behaviour, with most significant agencies now running formal preferred supplier lists and removing umbrellas that cannot demonstrate clean compliance. The knock-on effect for the avoidance market is significant: a non-compliant umbrella that cannot get onto agency PSLs cannot access the volume of workers it needs to sustain its business model.

The main structures HMRC targets

Understanding what HMRC is looking for helps you assess whether any past arrangement may be in scope. The non-compliant umbrella market has converged on a small number of recurring structures, each described in HMRC's Spotlight publications.

Loan schemes and disguised remuneration

The most prevalent structure involves the worker receiving a portion of their assignment rate as a loan rather than salary. The loan is typically advanced by a connected entity, often an offshore trust, an employee benefit trust (EBT), or a third-party lender that exists only to facilitate the arrangement. Because a loan is not income at the point it is received, no PAYE or NIC is applied to it. The worker receives a higher net payment than the PAYE chain alone would produce.

HMRC's position, upheld consistently in tribunals and confirmed by the Supreme Court in RFC 2012 Plc (in liquidation) v Advocate General for Scotland [2017] UKSC 45, is that these payments are employment income at the point they are made, regardless of their loan label. The loan is a disguise. The worker is liable for the income tax and NIC that should have been deducted, plus interest from the date the tax was due.

The Loan Charge, introduced by Finance Act 2017, was designed to collect outstanding disguised-remuneration loan balances that had not been settled with HMRC. As originally enacted it reached loans made from 9 April 1999, but following the 2019 review led by Sir Amyas Morse its scope now starts at 9 December 2010: earlier loans are out of scope entirely, and loans made between 9 December 2010 and 5 April 2016 are excluded where the scheme use was fully disclosed to HMRC and HMRC did not act. The charge remains live for loans within its current scope that have not been repaid or settled, and a further independent review reported in 2025. If you received payments described as loans or advances through any umbrella or payroll arrangement from December 2010 onwards and those loans are outstanding, you need to assess your Loan Charge exposure with specialist advice.

Trust and EBT arrangements

A related structure routes part of the assignment rate into a discretionary trust or employee benefit trust, from which payments are made to the worker as beneficiary distributions. The promoter's argument is that trust distributions are not employment income. HMRC's counterargument, again consistently upheld, is that where the trust arrangement exists solely to extract employment income while avoiding PAYE, the payments remain employment income in the hands of the worker. These arrangements are within the disguised-remuneration legislation in Part 7A of ITEPA 2003.

Mini-umbrella fraud

Mini-umbrella fraud is structurally distinct from loan schemes but appears on HMRC's radar in the same enforcement context. The arrangement splits a large contractor workforce across dozens or hundreds of small limited companies, each with a small number of workers, keeping each entity below the Employment Allowance threshold and sometimes below the VAT registration threshold. The small company directors are often nominees unaware of the full structure. Each entity exploits allowances and thresholds designed for genuine small businesses, multiplied across the fleet. The effect is to reduce the employer-side tax take on each worker.

HMRC considers mini-umbrella fraud a criminal matter as well as a civil compliance failure. Workers channelled through a mini-umbrella structure may not have been aware of it, but the PAYE and NIC that should have been paid remains due. More detail on how to spot and avoid these structures is in our mini-umbrella fraud guide.

Salary advance and high take-home promises

A variant seen in the market presents itself as a compliant umbrella but promises take-home percentages materially above what a standard PAYE deduction chain would produce. The mechanism is typically a salary advance or a non-contractual bonus paid separately from the PAYE salary, which in practice represents the portion of the assignment rate that has not gone through payroll. In some versions, the advance is never formally collected, creating a disguised-remuneration liability over time.

The diagnostic test is simple: if the take-home percentage an umbrella promises cannot be reconciled arithmetically from the assignment rate through employer NIC (15% on earnings above £5,000), Apprenticeship Levy, umbrella margin, employee NIC and income tax at 2026/27 rates, some of the assignment rate is not going through PAYE. That is the warning sign.

How to check whether your umbrella is implicated

There are four steps to a basic compliance check.

Step 1: Check the HMRC named-schemes list

Go directly to gov.uk/government/publications/named-tax-avoidance-schemes-promoters-enablers-and-suppliers and search for the name of your umbrella or payroll company. Also search for the name of any connected entity that appeared on your payslip or correspondence. The list includes both the scheme name and the promoter's legal name, which are sometimes different. If you find a match, note the date range the scheme is described as operating, since your engagement years may or may not overlap.

Step 2: Examine your payslips

A compliant umbrella payslip shows a single gross salary figure, PAYE income tax, employee NIC (Class 1 primary), and possibly auto-enrolment pension contributions. The net is what you receive. If your payslips show a PAYE salary significantly lower than you expected, combined with a second payment described as a loan, advance, credit, non-contractual bonus or trust payment, that second line is the risk item. Keep all payslips. They are key documents in any HMRC enquiry or settlement negotiation.

Step 3: Check FCSA and Professional Passport accreditation

Both FCSA (fcsa.org.uk) and Professional Passport (professionalpassport.com) publish live lists of their accredited members. Accreditation is not a guarantee of compliance in every respect, but an umbrella that is a current, good-standing member of either body is committed to compliant PAYE-only payment structures and compliant Key Information Documents. An umbrella that was never accredited, or that has been suspended or removed from the list, warrants greater scrutiny.

Step 4: Review your Key Information Document

Before or at the start of any assignment, a compliant umbrella must provide a Key Information Document (KID) under the Conduct of Employment Agencies and Employment Businesses Regulations 2003. It must itemise the assignment rate, every deduction category and the expected net pay. If your KID showed only a partial deduction chain, or if you never received one, that is a compliance breach. If the net pay figure in the KID cannot be reconciled from the assignment rate through the standard employer and employee cost chain, the difference is the amount being routed outside PAYE. More on what a compliant deduction chain looks like and what each line on a compliant payslip should show is in our umbrella companies explained guide.

HMRC also provides an online tool, "work out pay from an umbrella company", on gov.uk. You enter your assignment rate and it estimates what your gross and net pay should look like through a compliant deduction chain. If your actual payslip departs materially from the tool's output, that gap is the amount likely being routed outside PAYE.

What HMRC does: nudge letters, enquiries and assessments

HMRC's enforcement approach against umbrella avoidance users typically follows a sequence. Understanding where you are in that sequence affects what you should do next.

Nudge letters

A nudge letter (sometimes called an One to Many letter) is a targeted communication sent to workers HMRC believes used a specific arrangement. HMRC uses information obtained under Schedule 36 information notices (which compel umbrellas, agencies and banks to disclose records) to identify workers in scope. A nudge letter is not a tax demand, but it is not a generic warning either. It means HMRC has data placing you in the arrangement for the years it names. The letter will usually direct you to check the named-schemes list and consider whether you need to amend your self-assessment return or contact HMRC.

If you receive a nudge letter, take it seriously. The appropriate response depends on whether you believe you owe tax, whether the years named are still open for amendment or enquiry, and whether HMRC has indicated a settlement opportunity. Taking advice before responding avoids inadvertent admissions that complicate your position.

Formal compliance checks and enquiries

Where a nudge letter does not prompt a response or self-correction, HMRC may open a formal compliance check (for PAYE purposes) or a self-assessment enquiry (under s.9A TMA 1970 for income tax). A compliance check is HMRC's right to examine records relating to a specific return or period. Once opened, it cannot be ignored. HMRC will issue information requests with statutory deadlines, and failure to respond leads to information notices with penalty consequences.

Assessments and determinations

If a compliance check or enquiry concludes without agreement, HMRC issues a formal assessment or determination of the tax it believes is due. In disguised-remuneration cases, HMRC typically assesses the full amount of the loan or non-PAYE payment as income for the relevant year, applies the income tax and NIC at the applicable rates for that year, and calculates interest from the date the tax was originally due. Penalties are then determined separately based on the nature of the behaviour (careless, deliberate, concealed).

Assessments can be appealed to the First-tier Tribunal, but the legal analysis on disguised remuneration is well-established in HMRC's favour following the Rangers decision and subsequent cases. The majority of tribunal appeals in this area have not succeeded, and the cost of an unsuccessful appeal includes professional fees, HMRC's costs in some circumstances, and accruing interest throughout the appeal period.

What to do if you have used a scheme: the settlement route

If you have used an umbrella arrangement that turns out to have routed part of your pay outside PAYE, the generally recommended path is to engage with HMRC's settlement process rather than waiting for a formal assessment. Here is how that process works in broad terms.

Calculate the exposure

The starting point is identifying the amounts paid to you outside PAYE in each tax year you used the arrangement. Your payslips, bank statements and any loan agreements are the primary records. The exposure is the income tax and NIC that should have been paid on those amounts in each year, at the rates applicable to that year (which vary because basic and higher rates have changed over time). Interest runs from the date the tax was originally due (broadly 31 January after the end of the relevant tax year for income tax).

Engage with HMRC's settlement terms

HMRC publishes Disguised Remuneration Settlement Terms on gov.uk, which set out the basis on which it will settle cases. The key features are: settlement is based on the tax due (not a reduced amount) plus interest; penalties are typically mitigated for those who cooperate fully, engage promptly and did not deliberately conceal the arrangement; and once a formal settlement agreement is signed, the Loan Charge does not apply to the settled years. Settlement removes the uncertainty of a tribunal outcome and stops interest accruing from the date of settlement. HMRC has on occasion offered specific time-limited settlement opportunities for particular schemes; when those windows are open, engaging within the window typically produces better terms than waiting.

Repay outstanding loans where possible

Where the arrangement involved loans that are technically still outstanding (even if the expectation was always that they would not be called in), repaying the principal before settlement closes can in some circumstances reduce the overall liability, depending on the year and structure. This is a complex calculation that requires specialist advice because repayment timing interacts with the Loan Charge scope and the settlement terms in ways that are not straightforward.

Consider the Loan Charge position

If your loans are within Loan Charge scope and you have not settled, the Loan Charge applies to you. The Loan Charge was amended by the Finance Act 2020 to remove from scope all loans made before 9 December 2010, and loans made between 9 December 2010 and 5 April 2016 where the scheme use was fully disclosed to HMRC and HMRC did not take action. The remaining in-scope loans were charged as income of 2018/19. If you were within scope and did not report and pay the Loan Charge in your 2018/19 self-assessment return, you are in a position of default interest and potential penalties compounding. The only route out is settlement with HMRC or, for a small category, successful challenge on the narrow grounds that the specific loan falls outside the amended scope.

Protecting yourself going forward

The practical steps to avoiding this position in future are consistent with what a careful contractor should do at the point of choosing any umbrella.

Use an umbrella that is a current, good-standing member of FCSA or Professional Passport. Verify this directly on their websites before signing anything. Confirm the umbrella is on your agency's preferred supplier list, which post-April 2026 carries real weight given the JSL reform. Obtain and scrutinise the Key Information Document before your first assignment. Check that the net pay figure reconciles from the assignment rate through the standard deduction chain. If any umbrella offers a take-home percentage that cannot be produced by a standard PAYE calculation, do not use it, regardless of the explanation offered.

A detailed checklist of what to verify before committing to any umbrella, including questions to ask about margin, KID transparency and accreditation, is in our compliant umbrella company checklist. The general overview of how a compliant umbrella operates, the deduction chain from assignment rate to net pay, and the April 2026 JSL reform is in our umbrella companies explained guide.

A note on the live HMRC list: always check the current version

The named-schemes list at gov.uk is the only authoritative source for which umbrellas and promoters are currently under HMRC investigation. This page cannot reproduce the list, because it changes and any snapshot here would be out of date within days. The gov.uk page shows the date it was last updated; check the current version directly before drawing any conclusion about a specific entity. Promoters that operated under one trading name may have dissolved and reconstituted under another; checking the legal names and associated entities listed on the gov.uk page is more reliable than a simple name search.

HMRC also publishes Spotlights on specific scheme types at gov.uk/guidance/tax-avoidance-spotlights. Reading the Spotlight relevant to any arrangement you have used or are being offered gives you the legal analysis HMRC will apply and the statutory basis on which it believes the arrangement fails. The Spotlights are written for non-specialist readers and are a useful first resource before taking professional advice.

Getting specialist advice

The tax analysis in disguised-remuneration and umbrella avoidance cases is fact-specific. The years involved, the exact structure of the payments, whether loans were formally documented, whether they have been partially repaid, and whether the arrangement was disclosed to HMRC at the time all affect the calculation and the appropriate response to HMRC. A contractor accountant with experience of HMRC settlement negotiations in this area is in a fundamentally different position to handle your case than a general-purpose tax adviser who has not dealt with the Loan Charge or Part 7A of ITEPA 2003 before.

If you have received a nudge letter, discovered that your umbrella appears on the named-schemes list, or have any concern about an arrangement you have used, the right first step is a specialist review of the years and amounts involved before any contact with HMRC. The review costs considerably less than the consequences of an unadvised response, and it gives you the information you need to decide whether settlement, amendment of returns, or another course of action is appropriate in your specific position.

Our contractor accountancy services include specialist support for contractors in this position, including review of past arrangements and representation in HMRC settlement negotiations. Contact us through the enquiry form to discuss your situation.