Piles of papers on a desk, magnifying glass resting on its side on the top and magnifying "Tax Fraud" written on a folder in the background
How can employers spot tax fraud schemes?

HMRC have highlighted concerns about arrangements claiming to reduce employment tax liabilities using tax credits, and promoting Bills of Exchange as a way to pay tax liabilities.

We have previously covered both the tax credit and Bills of Exchange schemes in Employer Focus. Employers who are unfamiliar with the schemes may wish to read those articles for further background.

Why does it matter?

HMRC are clear that both of these schemes are fraudulent and could expose businesses to significant legal, financial and operational risks.

Employers remain responsible for ensuring that the correct amount of Income Tax, National Insurance Contributions (NICs) and other statutory deductions is paid to HMRC, even where payroll obligations have been outsourced to a third party.

HMRC warn that businesses involved in these arrangements may face liabilities for unpaid tax and other deductions, along with any interest and penalties arising. Depending on the circumstances, there may also be wider consequences, including payroll disruption and reputational damage and, in serious cases, criminal investigation.

Warning signs to look out for

HMRC advise employers to exercise caution where a provider:

  • claims it can reduce PAYE or NIC liabilities using tax credits;
  • says tax credits have been obtained through the acquisition of another business;
  • promotes Bills of Exchange, money orders or similar instruments as a way of paying HMRC;
  • claims that arrangements are approved by HMRC or King’s Counsel;
  • advertises arrangements as being outside the scope of the umbrella company rules introduced from April 2026; or
  • offers incentives or commission payments for joining a scheme.

Businesses should be particularly wary of arrangements that appear too good to be true or promise significant tax savings.  

What should employers do?

Employers should undertake appropriate due diligence before engaging payroll providers, umbrella companies or other intermediaries.

Employers concerned that they may already be involved in one of these schemes can use HMRC's disclosure facilities to notify them. Suspected tax fraud or avoidance arrangements can also be reported directly to HMRC.

Further information

Staying informed and conducting proper due diligence are essential to protecting your organisation. HMRC’s Tax fraud warnings for attempts to use ‘Bills of Exchange’ to pay HMRC and schemes of tax credits to reducing liabilities for employers provide further detail on how these schemes operate and how to safeguard your business.

 

This article reflects the position at the date of publication shown above. If you are reading this at a later date you are advised to check that that position has not changed in the time since.   

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