Umbrella companies, HMRC just handed you one less excuse not to comply

It’s pleasing to see new HMRC guidance for contractor umbrella companies being described online as “brilliant.”

And that’s not just because we were part of the gang who helped HMRC develop it but also because of its intentions, writes Meredith McCammond, technical tax officer at LITRG.

Rooting out abusive behaviour in the umbrella sector

It’s even more pleasing that this virtual ‘thumbs-up’ to the guidance, published by HMRC on April 8th 2025, came from a chief operating officer of an umbrella company.

The primary intention of the guidance is to spell out what ‘good’ looks like for the (still) unregulated umbrella sector, as part of rooting out abusive behaviour.

The title of the 1,600-word HMRC guidance is a dead giveaway: “Examples of good practice for umbrella companies in the temporary labour market.”

But the secondary intention of the guidance is to try to provide legitimate and well-intentioned umbrella companies with a bit of support and leverage.

Long overdue, HMRC’s practical examples aren’t part of a fishing expedition

While it’s valuable and long overdue, the guidance’s “practical examples” won’t be used by HMRC as part of a fishing expedition.

Put another way, HMRC won’t now be checking whether the ‘best-practice actions’ laid out in the document are being met. That said, some of the provided examples relate to legal obligations which could of course be checked on.  

HMRC’s ‘Good practice umbrella company examples’ should be contractor bedtime reading, too

The Revenue guidance isn’t bedtime reading for only umbrellas, of course. It can be difficult for umbrella company contractors to fully understand or even just know when they are being paid through Disguised Remuneration (DR).

So the April 8th guidance should help fill this vacuum.

Disguised Remuneration hallmarks

If umbrella employees read the Revenue’s new document, alongside our own guidance which we’ve updated for the 2025-26 tax year, they can then use their judgement on whether their own umbrella is demonstrating ‘best-practice.’ And if they conclude their umbrella isn’t – or worse is demonstrating the hallmarks of DR – they should move on. And quickly.

Almost needless to say, the guidance isn’t a silver bullet. A bit like reading it through the lens of our own guidance, it’s best-read with HMRC’s other publications, like ‘Working through an umbrella company.’

Taxman is making very clear agencies are in the PAYE frame from April 6th 2026

Interestingly, that document was first published back in 2021, but it was updated last Monday with a link to “Tackling tax non-compliance: umbrella company market.” It’s HMRC’s way of making clear that, from April 6th2026, agencies will be responsible for accounting for PAYE when they find contractors work through an umbrella company.

Speaking of agencies, November 2023’s “Responsibilities for employment businesses working with umbrella companies” is also a very useful read for workers. And this HMRC guidance also now references the tax compliance plan, set to be introduced alongside umbrella company regulation from April 6th 2026.

Follow the money

There’s arguably an even more helpful HMRC update. Right on time for the new but now underway tax year, the Revenue has updated its umbrella company pay and tax checking tool, which basically lets contractors ‘follow the money,’ all the way from the assignment rate to your net pay, potentially allowing you to spot any problems along the way.  

One less excuse. Quite a few fewer excuses actually… 

Led by the showpiece -- the brand new “Examples of good practice…,” these HMRC guidance documents collectively mean workers are now in the best position possible to navigate through the complexities of umbrella working, with the most information yet on how to steer themselves clear of trouble.