HMRC has increased its warnings to contractors about fraudulent payslip practices in the umbrella company sector. With new legislation shifting PAYE responsibilities across the supply chain from 6 April 2026, scrutiny of umbrella payroll has never been higher. If you work through an umbrella company, understanding what a legitimate payslip looks like, and how to spot one that is not, is now a practical necessity.

What HMRC’s Warning Covers

HMRC’s concerns centre on three main types of non-compliance in the umbrella sector.

Disguised Remuneration

In a disguised remuneration scheme, a worker receives a small taxable salary through PAYE, while the rest of their pay is delivered as “loans,” “advances,” “annuities,” or similar labels. These payments are designed to avoid Income Tax and National Insurance Contributions (NICs). HMRC treats all such payments as taxable earnings. Workers caught in these arrangements can face backdated tax demands, interest, and penalties, sometimes years after receiving the payments.

Workers remain personally liable for any unpaid tax, regardless of the umbrella company’s conduct.

Inflated or Hidden Expenses

Some non-compliant umbrella companies inflate expense claims or include deductions that do not correspond to genuine costs. If HMRC investigates, the contractor may be held responsible for tax on earnings that were not properly declared.

Mini Umbrella Company (MUC) Fraud

Mini umbrella company fraud involves criminal groups creating large numbers of small limited companies to exploit reliefs intended for small businesses, such as the Employment Allowance and the VAT Flat Rate Scheme. Workers are often moved between these entities without their knowledge. HMRC’s GOV.UK guidance on MUC fraud notes that these companies typically last less than 18 months before being dissolved and replaced by new ones.

How to Spot Fraudulent Payslips

HMRC and industry bodies have identified several warning signs that suggest a payslip may not be legitimate.

Your take-home pay seems too high. If the amount in your bank account is significantly more than you would expect after standard tax and NICs deductions, that may be a sign something is wrong. HMRC provides a free online tool (“Work out pay from an umbrella company” on GOV.UK) that lets you estimate your net pay based on your assignment rate.

You receive separate payments labelled as loans, advances, or bonuses. Any payment outside your normal PAYE salary that reduces the amount of tax you pay is a red flag. Labels such as “fiduciary receipt,” “credit facility,” or “capital payment” are common in disguised remuneration schemes.

Employer National Insurance is missing or unclear. A compliant payslip will show employer NICs as a separate line. If this is absent, bundled with other costs, or significantly lower than expected, the umbrella company may not be paying what it owes.

There is no PAYE reference, or it changes frequently. Every employer registered with HMRC has a PAYE reference. If your payslip does not show one, or if the reference changes regularly, this may indicate you are being moved between entities, a common feature of mini umbrella company fraud.

Holiday pay is not shown separately. Under UK employment law, umbrella contractors are entitled to holiday pay. Whether it is accrued or rolled up, it should appear as a distinct line on your payslip. If it is missing or absorbed into another figure, this warrants further investigation.

Deductions are vague or bundled. A legitimate payslip itemises each deduction clearly: Income Tax, employee NICs, pension contributions, and the umbrella company’s margin. If deductions are grouped into a single “admin” or “service” charge without explanation, this is a concern.

What a Compliant Payslip Looks Like

A payslip from a compliant umbrella company will include the following, clearly itemised:

• Gross pay (based on hours worked and the agreed rate)
• Employer costs shown separately: employer NICs, Apprenticeship Levy (where applicable), employer pension contributions.
• The umbrella company’s margin (their fee for providing employment services)
• Statutory deductions itemised individually: Income Tax, employee NICs, employee pension contributions, and any student loan repayments
• Holiday pay, shown as a separate line, whether accrued or rolled up (using the standard 12.07% calculation)
• Net pay, matching the amount deposited in your bank account
• PAYE reference and employer name consistent from one pay period to the next
• Your tax code and NI category letter

Umbrella companies that hold FCSA (Freelancer and Contractor Services Association) accreditation are audited annually by independent assessors to confirm they meet compliance standards, including payslip transparency. Those that also carry SafeRec certification go further: SafeRec uses automated, real-time auditing of payslips at the point of creation, cross-referencing them against HMRC Real-Time Information (RTI) submissions and verifying that declared tax liabilities have been paid.

What to Do If You Suspect Fraud

If your payslip does not match the standards described above, or if you notice any of the red flags listed, take the following steps.

1. Check your records with HMRC. Log in to your Personal Tax Account or use the HMRC app to confirm that HMRC has received the tax and NICs shown on your payslip.

2. Use HMRC’s pay estimate tool. The “Work out pay from an umbrella company” tool on GOV.UK allows you to enter your assignment rate and see an estimated breakdown of what your pay should look like.

3. Contact your umbrella company. Ask for a written explanation of any deductions or payments you do not understand. A compliant provider will respond with a clear, itemised breakdown.

4. Report your concerns to HMRC. You can report suspected fraud through the GOV.UK “Report tax fraud” page (use the reference code “TAC”) or by calling the HMRC fraud hotline on 0800 788 887 (open 8 am to 8 pm daily). Reports can be made anonymously.

5. Consider switching providers. If you are not satisfied with the explanation you receive, or if your umbrella company cannot demonstrate compliance, consider moving to an FCSA-accredited and SafeRec-certified provider. Your recruitment agency should be able to offer alternative options.

SmartWork’s Position

SmartWork holds FCSA accreditation and SafeRec certification, providing two independent layers of compliance verification. Every payslip processed through SmartWork is audited in real time via SafeRec’s automated system, which cross-references payslip data against HMRC RTI submissions and confirms that all tax and NICs have been paid.

SmartWork also holds APSCo Trusted Partner status and ISO 27001 certification for information security. Every contractor receives a clear, itemised payslip with all deductions broken down individually, and is assigned a designated business manager who can answer questions about pay, deductions, or compliance at any time. Payslips are also available through the SafeRec PayslipBuddy platform, which provides independent weekly audit reports confirming the accuracy of your pay.

Conclusion

The increase in HMRC enforcement activity across the umbrella sector reflects the scale of the problem. But contractors are not powerless. By understanding what a compliant payslip looks like and knowing the warning signs of fraud, you can protect yourself from unexpected tax liabilities and ensure your pay is handled correctly.

If something on your payslip does not look right, check it. If it still does not add up, report it. Transparency is the most effective protection available to umbrella contractors, and it starts with the payslip you receive every pay period.