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Are umbrella companies legal?

Yes. The use of umbrella companies is completely legal. However, if an umbrella company is not following the tax legislations and regulations (HMRC), it can be shut down. Because not following the existing tax rules is illegal. Besides that, it is illegal for an umbrella company to pay the national insurance contributions of employers. So an umbrella company itself isn’t illegal. An umbrella company who operates in an illegal way, is.

The same thing counts for offshore umbrella companies. Those companies offer the highest return of all the routes that a contractor can take. And using those offshore umbrella companies is more tax avoidance than tax evasion. The former is legal, the latter is illegal.

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