HMRC has recently issued important guidance to NHS trusts, aimed at helping them avoid becoming entangled in tax avoidance schemes or fraudulent labour supply chains. This alert targets those within NHS trusts who are responsible for arranging or paying staff through employment intermediaries, such as recruitment agencies. The document emphasises the growing risk of significant tax fraud and avoidance within labour supply chains and offers practical advice to mitigate these risks.
Understanding the Risk
According to HMRC, organised criminal groups and promoters of tax avoidance are increasingly exploiting labour supply chains within the NHS and other sectors. These schemes can lead to:
- Significant unpaid taxes – impacting public finances.
- Incorrect tax payments by workers – leaving workers at risk of future tax liabilities.
- Workers missing out on employment rights – such as holiday pay, sick leave, and pension contributions.
- Legal, financial, and reputational risks for NHS trusts – potentially leading to investigations, penalties, or damage to public trust.
Non-Compliant Models Identified in NHS Labour Supply Chains
HMRC’s intelligence and compliance activities have uncovered several non-compliant models in NHS labour supply chains, including:
- Non-Compliant Umbrella Companies: These intermediaries are responsible for paying workers, but some fraudulently claim the correct tax is deducted when it is not. Others use disguised remuneration schemes to artificially reduce tax liabilities.
- Personal Service Companies (PSCs): Workers are sometimes incorrectly engaged through PSCs, with other intermediaries positioned between recruitment agencies and the PSCs. This creates complex supply chains, making it difficult to determine if Off-Payroll Working Rules (IR35) apply. In some instances, false payslips and PAYE Real-Time Information Returns are used to conceal the true engagement model.
HMRC’s Recommendations for NHS Trusts
To safeguard against engaging workers through fraudulent or tax avoidance-driven supply chains, HMRC recommends that NHS trusts:
- Implement Robust Due Diligence Processes: Establish and regularly review thorough due diligence checks on all labour suppliers. Maintain a record of all checks conducted.
- Understand Your Labour Supply Chain: Know who your labour suppliers are, how they engage workers, and how they operate PAYE for the workers they provide.
- Identify Intermediaries: Determine if recruitment agencies outsource workers or payroll responsibilities to other businesses. Understand why these intermediaries are involved and ensure they are compliant with tax regulations.
- Verify Payment and Compliance Documentation: Carefully check payslips and PAYE Real-Time Information to ensure they are genuine. HMRC advises obtaining payslips directly from workers for verification.
- Regularly Update Due Diligence Processes: Continuously review and refresh due diligence practices and ensure that suppliers also conduct thorough checks on their own supply chains.
What Happens Next?
HMRC has warned that they may contact NHS trusts where tax losses are identified within supply chains. However, even if no direct contact is made, trusts are advised to remain vigilant and proactive in safeguarding their supply chains against fraudulent or non-compliant practices.
Later this year, HMRC plans to host a webinar to provide further guidance on reducing the risk of fraud in labour supply chains. NHS trusts are encouraged to participate to stay informed of the latest compliance requirements.
For more detailed information, you can read the full HMRC guidance here.
How Plus Us Can Help NHS Trusts Stay Compliant
Navigating the complexities of labour supply chains and maintaining compliance can be challenging. At Plus Us, we understand the risks involved and the importance of transparency and accuracy in payroll and tax payments.
As a trusted and compliant payroll partner, Plus Us provides:
- Transparent Payroll Solutions: Ensuring all taxes are correctly calculated and paid, protecting both NHS trusts and their workers from financial and legal risks.
- Robust Compliance Checks: Our due diligence processes help NHS trusts meet HMRC’s requirements, reducing the risk of engaging in fraudulent or non-compliant labour supply chains.
- Expert Guidance and Support: Our team of experts is always available to provide advice, answer questions, and assist with compliance challenges.
If you have any questions about the HMRC guidance or need support with payroll and compliance, get in touch with us today. Plus Us is here to help you navigate these challenges confidently and securely.
