HMRC is aware that businesses are being approached by organisations offering models which falsely claim to be able to reduce employment costs through ‘tax credits’ offset from third party businesses they have acquired. HMRC considers these arrangements tax evasion.
HMRC is aware that businesses are being approached by organisations offering models which falsely claim to be able to reduce employment costs through ‘tax credits’ offset from third party businesses they have acquired. HMRC considers these arrangements tax evasion.
They falsely claim to be able to reduce employment costs through ‘tax credits’ offset from third party businesses they have acquired.
The organisations offering these models may call themselves, but not exclusively, payroll providers, intermediaries, umbrella solutions or back-office providers.
They falsely claim that they can acquire businesses that have tax credits on file with HMRC, which may include businesses in pre-administration. They claim to use the tax credits to offset employment taxes, such as PAYE and National Insurance due to HMRC by operating the payroll and, as a result, can reduce the amount you need to pay.
Often in these arrangements none of the taxes due to HMRC are being paid. They do this by simply not paying the taxes over to HMRC or creating false documents to give the impression that the appropriate returns are made to HMRC and the taxes paid over.
HMRC do not approve models or schemes and businesses should be wary of anyone claiming they have HMRC approval for any arrangements they may be offering.
They claim that these arrangements are ‘not tax avoidance’ and therefore must be ‘compliant’ but HMRC considers these arrangements tax evasion.
Marketing materials may claim that the model will fall outside of the new umbrella company legislation due in April 2026, however, this will not be the case.
The rules from 2026 will make sure that agencies will be liable for any underpayment of tax on workers PAYE.
You should not rely on the fact you were told that the arrangements are fully tax compliant.
You should watch out for the signs this fraudulent model is being marketed to you:
- third parties, such as a joint employment, co-employment, Professional Employer Organisation (PEO) or other intermediaries offering models that claim to offset your tax liability using tax credits
- using tax credits obtained by acquiring companies in financial difficulty or maybe in pre administration
- accounting models that claim to avoid the umbrella legislation starting on 6th April 2026
- models that claim they are HMRC approved
- models that claim they are Kings Counsel (KC) approved
- incentives or ‘kick back’ payments for using the model being offered
You can report tax avoidance, evasion and fraud arrangements or schemes and the person offering you them to HMRC using our report tax fraud or avoidance online form.
You can submit this form anonymously and do not have to give your name, address or your email.
You can phone HMRC to report tax fraud or avoidance if you cannot use the online form.
HMRC says it is committed to tackling fraud and will continue to use its full range of criminal and civil powers to stop fraud and take action against those who break the rules.
Scams and misleading schemes are prevalent
If feels like their are almost daily promotions and adverts of what claim to be HMRC approved or HMRC compliant schemes whether that relates to umbrella or tax credit arrangements, tax refund companies that retain significant proportions or a whole group of salary sacrifice promotions for more unusual things like Groceries, or promoting Childcare arrangements with tax and NI relief where the employer has no particular involvement or risk.
By operating these non-compliant schemes, employer place themselves in significant risk for liabilities due.
PAYadvice.UK 16/11/2025