HM Revenue and Customs (HMRC) has begun briefing businesses and recruiters on the importance of avoiding fraudulent payroll tax credit schemes that claim to help reduce employment taxes.
The briefing highlights how businesses are being contacted by payroll providers, umbrella companies and back-office schemes and what they are being told to do.
HMRC has quickly looked to clarify the situation and offer recommendations to business owners and employers to ensure they can spot signs of these fraudulent schemes and remain compliant.
What are organisations telling business owners and employers?
Employers and agencies are being contacted and told they can use their tax credits to reduce their employer’s pay as you earn (PAYE) and National Insurance Contributions (NIC).
These tax credits are supposedly held by an individual’s business and can be acquired by the organisation offering the advice.
They suggest it can be done through joint employment, co-employment or professional employer organisation options by creating fake documents and an illusion that the tax returns have been filed with HMRC.
The companies are also playing on the concerns business owners and employers have with the new umbrella company legislation taking effect in April 2026, which will make agencies liable for any underpayment of tax on workers’ PAYE.
However, HMRC has outlined that these schemes are fraudulent and could put your business at risk.
HMRC remains vigilant and is keen to ensure businesses know their tax responsibilities and are fulfilling those without putting themselves in danger of fraud.
A stark reminder for employers
With fraudsters looking to exploit businesses in more intricate ways, it’s important to follow the guidelines set by HMRC and adhere to your own internal policies.
It is your responsibility to calculate and pay the correct amount of PAYE and NIC and file this information on time.
Not having the correct processes in place, like stringent checks to make sure the correct figures are being calculated, leaves you at risk of HMRC scrutinising your payroll filings leading you to paying the tax originally due plus additional fines.
The signs employers need to spot
HMRC has offered guidance to employers to ensure they can spot signs of a fraudulent scheme and avoid falling into their trap including:
- If they contact you in a capacity, claiming they can help you reduce your tax liabilities through tax credits.
- If they claim their model avoids the new umbrella company regulations taking effect in April 2026
- If they claim to be approved by HMRC and
- Offering incentives to use their scheme.
An instant red flag should be their claiming to be tax compliant. This should raise instant doubt, as should them using tax credits that have been acquired by a company in pre-administration or currently have financial difficulties.
Always contact an accountant to clarify your tax obligations
These schemes are deliberately designed to exploit your company and it’s important you spot the signs and avoid any interaction with them.
If you have concerns about your PAYE and NIC contributions and filing information with HMRC, you should always speak with an experienced team of accountants like us.
Contact us today for support understanding your payroll and tax obligations.
