A colleague of mine believes that if an Umbrella Company has found a loop hole in the law which it exploits to enable it to pay out in excess of say 90%, then it is not illegal to do so. Further more, if HMRC manages to have the law changed to close the loop hole any tax benefits enjoyed by those employed through the umbrella company would remain so, it is only after the law has been changed that any tax benefit would be lost and to continue to do so would be illegal and subject to pay back, penalties and fines or worse.
I was of the opinion that all of these tax avoidance schemes involving disguised loans from Trust Funds, Pensions etc. etc. were deemed illegal regardless of loop hole and it was only a matter of time before all involved would get the proverbial knock on the door.
I appreciate an answer in favour of my colleague could present a problem, so a private reply would be fine.