HM Treasury have opened a new Call for Evidence, ‘Umbrella Company Market’ inviting views on the role that umbrella companies play in the labour market, and how they interact with tax and employment rights. It sets out concerns raised by stakeholders, as well as government action already taken to tackle tax non-compliance and improve protection for workers.

At a glance

At a glance

External analysis and HMRC data suggest that the overall umbrella company market has grown significantly since it first became popular 20 years ago.

  • In 2007-08 an estimated 100,000 workers were working through umbrellas compared to around 500,000 in 2020-21.

The government is aware of concerns regarding non-compliance with employment law, as well as tax non-compliance including tax evasion through the use of mini umbrella companies, and Disguised remuneration schemes facilitated by umbrella companies.

The call for evidence points out that there is currently no mechanism for umbrella companies to be regulated in the way that employment agencies and employment businesses are, though as employers they are required to comply with wider employment and tax law.

The intention is to bring umbrella companies under the same regulation framework as agencies to address issues such as non-payment of wages, payroll ‘skimming’ and non-payment of holiday pay.

Steps have already been taken to combat tax non compliance such as the Disguised remuneration loan charge and action against Mini Umbrella Company (MUC) fraud and payroll company fraud.

The government wants to ensure it has a detailed and up to date understanding of the market and how it is continuing to evolve by seeking views on the benefits of the umbrella company and about umbrella company use and practices.

The call for evidence starts with a terminology list which has seventeen different terms explained, emphasising the complexities that workers have to grapple with when trying to understand how umbrella companies work.

Responses to the call for evidence should be sent to This email address is being protected from spambots. You need JavaScript enabled to view it.The closing date for submissions is 22 February 2022.

Useful guides on this topic

Starting Work 5. Agency or umbrella tax-avoidance risk
If you obtain contract work via an employment agency you could find yourself accidentally caught up in an illegal tax avoidance scheme. HMRC has now created a basic tool to help you detect whether you are in an illegal scheme. 

Spotlight 45: Umbrella companies
HMRC have published a tax Spotlight: ‘Umbrella companies offering to increase your take-home pay’. It highlights the fact that many employees and self-employed contractors are failing to realise that some staff agencies and umbrella companies are flouting tax anti-abuse rules.

Off-Payroll Working: public sector engagers
The 'Off-Payroll Working' rules move IR35: the responsibility to assess a worker's employment status and to deduct Pay-As-You-Earn (PAYE) and National Insurance Contributions (NICs) from a worker's fees, away from the worker's company to the End-Client in the labour supply chain.

Off-Payroll Working: PSCs & Private Sector Engagers
What is Off-Payroll Working? Who does it apply to? What are the rules?

IR35: Off-Payroll
What is IR35? How does it work? How is the deemed payment calculated? What expenses are deductible?

External link

Call for Evidence: Umbrella Company Market

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