HMRC Tax Fraud Warning – Tax Credit Models

HMRC has published a new Policy Paper; Tax fraud warning for employment agencies and employers: tax credits reducing liabilities for employers

The briefing warns of new models being marketed in the labour supply industry which HMRC considers are fraudulent on the basis that none of the taxes due to HMRC are being paid and/or false documents are being produced to give the impression that the appropriate returns are made to HMRC and the taxes paid over.   

HMRC is aware that temporary work agencies are being approached by organisations which falsely claim to be able to reduce employment costs through ‘tax credits’ offset from businesses they have acquired.    These credits are used to offset employment taxes such as PAYE and National Insurance Contributions.

Aspire Comment

We have experience of HMRC attempting to recover unpaid PAYE and NIC by the use of formal Determinations under Regulation 80 of the Income Tax (PAYE) Regulations 2003 and Decisions under Section 8 of the Social Security Contributions (Transfer of Functions etc) Act 1999.

In order to recover the “lost” PAYE/NIC, HMRC may deem the agency to be the employer.  It is vital to understand how to defend such an approach.

If you are subject to an enquiry from HMRC and/or are utilising an outsourced arrangement which is described as “joint employment”, “co-employment”, or “Professional Employer Organisation (PEO)”, significant liabilities, penalties and interest could accrue.   

If you would like to discuss HMRC’s likely approach to such arrangements, please contact us at enquire@aspirepartnership.co.uk   

Read the Policy Paper here.