Working with HM Treasury (HMT) and the Department for Business and Trade (DBT), HM Revenue and Customs (HMRC) have published new guidance for employment businesses who work with umbrella companies.
This guidance will help them to understand their legal responsibilities, support umbrella company workers in their supply chains and protect their business by reducing their risk of non-compliance.
An employment business must comply with employment and tax law when working with umbrella companies. There can be serious consequences if involved in non-compliant supply chains and do not take reasonable measures to avoid this. A non-compliant supply chain might include umbrella companies who do not follow employment and tax law.
In most circumstances, claiming not being aware of non-compliance is not a defence.
If HMRC investigates and finds an employment business is involved in non-compliant supply chains, HMRC may take action. This includes but is not limited to:
- prosecuting for failure to prevent facilitation of tax evasion in the supply chain
- denying rights to recover VAT input tax and issuing penalties if connected to VAT fraud
- issuing an enablers penalty for using an umbrella company that is operating tax avoidance or having been involved in designing, marketing or facilitating another person to avoid tax
- publishing details of those involved in tax avoidance schemes including promoters, enablers and suppliers and details of deliberate tax defaulters
Updated guidance for umbrella company workers working through an umbrella company now includes checks that workers can do to identify and avoid fraudulent umbrella companies.
PAYadvice.UK 4/12/2024