As the umbrella company market and all its stakeholders await further guidelines on upcoming legislation, which is due to come into force from April 2026, due diligence remains more important than ever.

HMRC analysis suggests that around 40 per cent of the 700,000 workers paid by umbrella companies in the UK were engaged by non-compliant umbrella companies at some point in 2022 to 2023. Furthermore, an estimated £500 million was lost to disguised remuneration tax avoidance schemes during this period, largely as a result of unscrupulous umbrella companies.

As we count down to legislation, every month, HMRC publishes new names on its list of known tax avoidance schemes, promoters, enablers and suppliers. The list is not complete, but it is a good place to start the due diligence process for any recruitment companies and temporary workers that arrange or receive pay through umbrella companies, to help them steer clear of non-compliant operators.

The alphabetical list is updated whenever new schemes, promoters, enablers, and suppliers are identified and verified. However, it does not include all active schemes and their facilitators, with many falling under the radar. Furthermore, of those included on the list, most will be removed after 12 months to comply with legislation, depending on what category they fall into or the specific circumstances of their case. In some cases, HMRC cannot publish information about fraudulent operators. For example, if representations are in progress or an appeal period is underway. This makes it difficult to gauge how many names have appeared on the list since it was first published.

According to a recent Freedom of Information (FOI) request, as at the end of September 2024 in total HMRC has published the details of 112 tax avoidance schemes; 106 promoters; and 45 connected persons, such as company directors and those individuals in control of the promoting entity. A further eight names were added to the list during October.

The quantity of schemes and frequency with which new names are added is indicative of the high volume of fraudulent operators and even with considerable due diligence, recognising the sophisticated tax avoidance schemes that are widespread in the unregulated contracting payroll market can be extremely difficult.

Are you aware of non-compliant activity?

HMRC encourages anyone involved or affected by listed schemes or who recognises any of the promoters, enablers or suppliers to contact HMRC. The Department also encourages the reporting of any known or suspected tax avoidance schemes not included in the list.

More details on the information that HMRC can publish and how the list is managed can be found here.

How can I protect myself from fraudulent activity?

The risks of engaging an unscrupulous payroll supplier include incorrect tax deductions, pay skimming, and withholding of holiday pay, which can lead to unexpected and substantial tax bills from HMRC down the line. As an unregulated sector, choosing to engage only an umbrella company that has been assessed by a reputable industry accreditor is essential.

Umbrella companies that are Members of the Payroll Compliance Authority (PCA) have been forensically assessed to guarantee that they are operating in accordance and compliance with all employment and taxation legislation.