A LONG-STANDING recruitment firm warned clients and workers to be vigilant of agencies using unscrupulous ‘umbrella companies’ to payroll temporary staff.
HM Revenue and Customs (HMRC) issued a caution as a growing number of non-compliant organisations are promoting tax avoidance schemes which can leave victims facing financial penalties and reputational damage.
Colwyn Bay and Bangor-based Supertemps – approaching its 45th year in business – urged people to be wary and look out for signs it could be happening to them.
Such schemes are targeted at contractors and temporary employees who may not know the risks, with red flags including economic incentives significantly higher than industry standards, inconsistent payslips, payments to third parties and offshore addresses.
Sarah Ellwood, Managing Director of Supertemps, said: “All our workers are PAYE and payrolled internally, so our processes are water-tight, but we have heard horror stories from other companies, and this issue is very topical.
“These umbrella companies can do a lot of damage, not only to the reputation of a recruitment agency but also that of end employers, and there can be financial penalties and tax implications for both.
“Agencies should be cautious and do their due diligence because the long-term impact can be very detrimental to them and their clients.
“Not all of these companies are dubious but sadly many of them are, and a lot of workers don’t even know they’re being paid via an umbrella company so it’s important to be transparent.”
Under new powers introduced in 2022, HMRC can publish information when they suspect ‘enablers’ are involved in promoting a tax avoidance scheme or having a role in making a scheme available to use.
The UK Government recently consulted on options to tackle non-compliance in the market, including penalties for agencies failing to carry out mandatory due diligence.
Sarah said: “There are a lot of steps business owners, procurement and HR departments and employees can take to protect themselves and make sure staff are being paid correctly,” said Sarah.
“Checking the HMRC list of named tax avoidance schemes, promoters, enablers and suppliers, and reporting anything untoward is crucial, as is taking a close look at your supply chain and ensuring any agencies you use are operating legally and ethically.
“If this is not the case, it could have repercussions on the agency, the end employer and worker.”
She added: “Ultimately, as recruitment agencies we have a duty of care to our clients and our workers and must operate within the law and with the highest ethics to protect both.
“If you are being offered workers at hourly rates that seem significantly cheaper you need question why.
“If you are not handling payroll in-house, look at the practices and background of the businesses that are on your behalf, take precautionary steps and do not leave your organisation open to potential legal and financial exposure.
“Doing so will ensure you operate within HMRC guidelines and, importantly, retain your reputation while adhering to ethical business standards.”
For more information, visit Working through an umbrella company – GOV.UK (www.gov.uk).
Visit the Supertemps website and follow @supertempsltd for the latest news and information from Supertemps.
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