HM Revenue & Customs (HMRC) has started briefing companies and recruitment firms on the growing risk of fraudulent payroll tax credit arrangements that falsely promise to cut employment tax liabilities.
The update explains how businesses are being approached by payroll operators, umbrella companies and various back-office service providers, and outlines the type of claims these organisations are making.
HMRC has moved swiftly to outline its position and offer clear guidance to employers so they can recognise these fraudulent schemes.
What are organisations telling employers?
A number of employers and employment agencies are being contacted and told that they can supposedly apply “tax credits” to reduce their pay-as-you-earn (PAYE) and National Insurance Contributions (NICs).
These so-called credits are said to be held within an individual’s business and can apparently be transferred to the advising organisation.
Those promoting the schemes often claim that the arrangement can operate through joint employment, co-employment or professional employer organisation structures, using fabricated documentation and creating a false impression that tax returns have been legitimately submitted to HMRC.
Many also prey on the anxiety around the incoming umbrella company rules due in April 2026, which will place responsibility on agencies for any unpaid PAYE tax relating to workers.
However, HMRC has made it clear that such arrangements are fraudulent and pose a serious risk to any business that becomes involved.
HMRC continues to monitor the situation and are encouraging employers to be fully aware of their tax duties and the dangers of being drawn into dishonest schemes.
A clear warning for employers
As fraudsters develop increasingly sophisticated ways to manipulate companies, it’s vital for employers to follow HMRC guidance and stick to robust internal controls.
You are ultimately responsible for calculating and paying the correct PAYE and NIC, and for submitting accurate information on time.
If your processes are weak and figures are not checked properly, you may face an HMRC investigation and be required to pay all underpaid tax, alongside other penalties HMRC may impose.
Warning signs employers should look for
HMRC has issued practical pointers to help employers identify dubious schemes and avoid becoming entangled in them, including:
A major red flag is any insistence that they are fully tax compliant because this should immediately raise concerns.
The same applies where the “tax credits” are said to come from companies in pre-administration or in serious financial trouble.
Always seek professional advice on your tax duties
These schemes are created with the intention of taking advantage of businesses, and it’s crucial to recognise the warning signs and avoid engaging with them.
If you have any doubts about your PAYE, NIC liabilities or payroll filings, you should consult a qualified accountant who can provide clarity and reassurance.
Get in touch with us today for expert advice on understanding your payroll processes and tax responsibilities.
